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Price-Band Stabilization Programs And Risk: An Application To The U.S. Corn Market

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  • Holt, Matthew T.

Abstract

The impacts of introducing a partial price stabilization scheme in the U.S. corn market are investigated by using a modified version of the bounded price variation model. Specifically, a model is developed and estimated that includes rational expectations of the first three central moments of the (truncated) equilibrium price distribution. The estimated model is used to stimulate market equilibrium effects of introducing upper and lower price limits through a tax-subsidy scheme. The results show that corn producers are downside risk averse, and that market feedback effects of price stabilization can, at times, be more important than direct effects.

Suggested Citation

  • Holt, Matthew T., 1994. "Price-Band Stabilization Programs And Risk: An Application To The U.S. Corn Market," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 19(2), pages 1-16, December.
    • Handle: RePEc:ags:jlaare:30749
    DOI: 10.22004/ag.econ.30749
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    2. Mbaga, Msafiri Daudi & Coyle, Barry T., 2003. "Beef Supply Response Under Uncertainty: An Autoregressive Distributed Lag Model," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 28(3), pages 1-21, December.
    3. Kim, Kwansoo & Chavas, Jean-Paul, 2002. "The Effects of Stocks and Price Floors on Price Dynamics and Volatility: An Application to the U.S. Nonfat Dry Milk Market," Working Papers 201558, University of Wisconsin-Madison, Department of Agricultural and Applied Economics, Food System Research Group.
    4. Peterson, Hikaru Hanawa & Tomek, William G., 2000. "Commodity Price Behavior: A Rational Expectations Storage Model of Corn," Working Papers 127682, Cornell University, Department of Applied Economics and Management.
    5. Hikaru Hanawa Peterson & William G. Tomek, 2005. "How much of commodity price behavior can a rational expectations storage model explain?," Agricultural Economics, International Association of Agricultural Economists, vol. 33(3), pages 289-303, November.
    6. Kim, Kwansoo & Chavas, Jean-Paul, 2002. "A Dynamic Analysis Of The Effects Of A Price Support Program On Price Dynamics And Price Volatility," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 27(2), pages 1-20, December.
    7. Bullock, David S. & Garcia, Philip & Shin, Kie-Yup, 2005. "Measuring producer welfare under output price uncertainty and risk non-neutrality," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 49(1), pages 1-21.
    8. Parcell, Joseph L. & Kastens, Terry L. & Dhuyvetter, Kevin C. & Schroeder, Ted C., 2000. "Agricultural Economists' Effectiveness In Reporting And Conveying Research Procedures And Results," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 29(2), pages 1-10, October.
    9. Kim, Kwansoo & Chavas, Jean-Paul, 2001. "The Effects of Stocks and Price Floor on Dynamics and Volatility: An Application to the U.S. Nonfat Dry Milk Market," Working Papers 201570, University of Wisconsin-Madison, Department of Agricultural and Applied Economics, Food System Research Group.
    10. Ihli, Hanna Julia & Musshoff, Oliver, 2013. "Investment Behavior of Ugandan Smallholder Farmers: An Experimental Analysis," GlobalFood Discussion Papers 154775, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development.

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