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On Stabilizing or Deregulating Food Prices


Author Info

  • Flåm, Sjur Didrik

    (University of Beren, Department of Economics)

  • Gaasland, Ivar


  • Vårdal, Erling

    (University of Bergen, Department of Economics)


This paper studies measurement of welfare e¤ects, transient and permanent, of stabilizing or deregulating prices in Cobweb-like settings. As in Cobweb-models, producers must commit inputs in face of uncertainty. Here, however, we consider producers who are concerned with adaptations of inputs rather than price predictions. This shift of emphasis reflects two things. First, since persistent randomness causes on-going price fluctuations, point predictions are of modest concern. Second, producers are likely to care more about profits than prices. Explored below are economic issues related to transitions between regulated and unregulated equilibrium. Our focus is on convergence, stability and welfare. The main motivation and the running example centers on agricultural commodities. The paper does, however, not review the case for or against market intervention. In stead it advocates and illustrates the use of tractable tools called stochastic approximation. These tools easily produce quantitative estimates to facilitate discussion of the pros and cons.

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Bibliographic Info

Paper provided by University of Bergen, Department of Economics in its series Working Papers in Economics with number 08/06.

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Length: 28 pages
Date of creation: 15 Jun 2006
Date of revision:
Handle: RePEc:hhs:bergec:2006_008

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Postal: Institutt for økonomi, Universitetet i Bergen, Postboks 7802, 5020 Bergen, Norway
Phone: (+47)55589200
Fax: (+47)55589210
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Related research

Keywords: Keywords: price stabilization; cobwebs; convergence; stochastic approximation.;

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  1. Ermoliev, Yu. & Keyzer, M. A. & Norkin, V., 2000. "Global convergence of the stochastic tatonnement process," Journal of Mathematical Economics, Elsevier, vol. 34(2), pages 173-190, October.
  2. Miranda, Mario J & Helmberger, Peter G, 1988. "The Effects of Commodity Price Stabilization Programs," American Economic Review, American Economic Association, vol. 78(1), pages 46-58, March.
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