IDEAS home Printed from https://ideas.repec.org/a/ags/jlaare/30945.html
   My bibliography  Save this article

In Defense Of Fence To Fence: Can The Backward Bending Supply Curve Exist?

Author

Listed:
  • Just, Richard E.
  • Zilberman, David

Abstract

Politicians dealing with the "farm problem" sometimes lament that output increases when prices go up and when prices go down. This article presents three possible theoretical explanations. In the first, farmers deplete soil (over-farm) when prices are low and imperfect capital markets prevent borrowing. In the second, farmers in financial stress (low prices) allocate more family labor to farming to meet debt-repayment constraints. In the third, wealth held in farmland tends to decline as prices decline. With decreasing absolute risk aversion, this increases risk aversion which, in extreme cases, causes negative supply response.

Suggested Citation

  • Just, Richard E. & Zilberman, David, 1992. "In Defense Of Fence To Fence: Can The Backward Bending Supply Curve Exist?," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 17(2), pages 1-9, December.
    • Handle: RePEc:ags:jlaare:30945
    DOI: 10.22004/ag.econ.30945
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/30945/files/17020277.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.30945?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Frohberg, Klaus, 1985. "International Institute for Applied Systems Analysis Basic Linked System World Agricultural Model," 1985: Agricultural Trade Modeling - The State of Practice and Research Issues Meeting, December 1985, Vancouver, British Columbia, Canada 50639, International Agricultural Trade Research Consortium.
    2. Howard D. Leathers & Jean-Paul Chavas, 1986. "Farm Debt, Default, and Foreclosure: An Economic Rationale for Policy Action," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(4), pages 828-837.
    3. Machina, Mark J, 1982. ""Expected Utility" Analysis without the Independence Axiom," Econometrica, Econometric Society, vol. 50(2), pages 277-323, March.
    4. Turnovsky, Stephen J & Shalit, Haim & Schmitz, Andrew, 1980. "Consumer's Surplus, Price Instability, and Consumer Welfare," Econometrica, Econometric Society, vol. 48(1), pages 135-152, January.
    5. Just, Richard E & Zilberman, David, 1986. "Does the Law of Supply Hold under Uncertainty?," Economic Journal, Royal Economic Society, vol. 96(382), pages 514-524, June.
    6. Paarlberg, Don, 1988. "The Backward-Bending Supply Curve: A Myth That Persists," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 3(1), pages 1-2.
    7. Just, Richard E., 1974. "Econometric Analysis of Production Decisions with Government Intervention: The Case of the California Field Crops," Monographs, University of California, Davis, Giannini Foundation, number 251950, December.
    8. Robison, Lindon J. & Barry, Peter J. & Burghardt, William G., 1987. "Borrowing Behavior Under Financial Stress By The Proprietary Firm: A Theoretical Analysis," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 12(2), pages 1-8, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Roel Jongeneel & Ana Gonzalez-Martinez, 2022. "EU Dairy after the Quota Abolition: Inelastic Asymmetric Price Responsiveness and Adverse Milk Supply during Crisis Time," Agriculture, MDPI, vol. 12(12), pages 1-16, November.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Christophe Gouel, 2014. "Food Price Volatility and Domestic Stabilization Policies in Developing Countries," NBER Chapters, in: The Economics of Food Price Volatility, pages 261-306, National Bureau of Economic Research, Inc.
    2. Segal, Uzi & Spivak, Avia, 1990. "First order versus second order risk aversion," Journal of Economic Theory, Elsevier, vol. 51(1), pages 111-125, June.
    3. Christophe Gouel, 2012. "Agricultural Price Instability: A Survey Of Competing Explanations And Remedies," Journal of Economic Surveys, Wiley Blackwell, vol. 26(1), pages 129-156, February.
    4. Lisa A. Robinson & James K. Hammitt, 2011. "Behavioral Economics and Regulatory Analysis," Risk Analysis, John Wiley & Sons, vol. 31(9), pages 1408-1422, September.
    5. Cerreia-Vioglio, Simone & Dillenberger, David & Ortoleva, Pietro, 2020. "An explicit representation for disappointment aversion and other betweenness preferences," Theoretical Economics, Econometric Society, vol. 15(4), November.
    6. Pope, Rulon D. & Just, Richard E., 1995. "Cost Function Estimation Under Risk," Working Papers 197825, University of Maryland, Department of Agricultural and Resource Economics.
    7. Wallace, Henry N. & Carman, Hoy F., 1979. "A Simulation Model of United States Sugar Beet Acreage Response," 1979 Annual Meeting, July 29-August 1, Pullman, Washington 278273, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    8. Botond Kőszegi & Matthew Rabin, 2006. "A Model of Reference-Dependent Preferences," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(4), pages 1133-1165.
    9. Epstein, Larry G. & Zin, Stanley E., 2001. "The independence axiom and asset returns," Journal of Empirical Finance, Elsevier, vol. 8(5), pages 537-572, December.
    10. Serra, Teresa & Zilberman, David & Goodwin, Barry K. & Featherstone, Allen M., 2005. "Effects of Decoupling on the Average and the Variability of Output," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24601, European Association of Agricultural Economists.
    11. Colson, Gérard, 1993. "Prenons-nous assez de risque dans les théories du risque?," L'Actualité Economique, Société Canadienne de Science Economique, vol. 69(1), pages 111-141, mars.
    12. Segal, Uzi, 1987. "Some remarks on Quiggin's anticipated utility," Journal of Economic Behavior & Organization, Elsevier, vol. 8(1), pages 145-154, March.
    13. Innes, Robert, 1987. "Government Target Price Intervention in Economies with Incomplete Markets: Welfare and Distribution," 1987 Annual Meeting, August 2-5, East Lansing, Michigan 270102, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    14. Simone Cerreia‐Vioglio & David Dillenberger & Pietro Ortoleva, 2015. "Cautious Expected Utility and the Certainty Effect," Econometrica, Econometric Society, vol. 83, pages 693-728, March.
    15. Steffen Huck & Wieland Müller, 2012. "Allais for all: Revisiting the paradox in a large representative sample," Journal of Risk and Uncertainty, Springer, vol. 44(3), pages 261-293, June.
    16. Hardaker, J. B., 1982. "Fundamental Aspects Of Risk And Uncertainty In Agriculture," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 21(2), October.
    17. Alexia Gaudeul, 2009. "A (Micro) Course in Microeconomic Theory for MSc Students," Working Papers id:1986, eSocialSciences.
    18. Grandmont Jean-michel, 1988. "Report on maurice allais'scientific works," CEPREMAP Working Papers (Couverture Orange) 8819, CEPREMAP.
    19. Machina, Mark J, 2001. "Payoff Kinks in Preferences over Lotteries," Journal of Risk and Uncertainty, Springer, vol. 23(3), pages 207-260, November.
    20. V. Kerry Smith & William H. Desvousges, 1988. "Risk Perception, Learning, and Individual Behavior," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 70(5), pages 1113-1117.

    More about this item

    Keywords

    Farm Management;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:jlaare:30945. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/waeaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.