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Producers' Price Expectations and the Size of the Welfare Gains from Price Stabilisation

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  • Scandizzo, Pasquale Lucio
  • Hazell, Peter B.R.
  • Anderson, Jock R.

Abstract

This paper uses a simulation model to measure the size of the social welfare gains from price stabilisation within the general setting of a non-linear, multiplicative risk and lagged expectations model of the market. The size of the gains is found to be relatively small when producers plan on the basis of rational expectations, but it can be quite substantial for other types of expectations behaviour, including those commonly assumed in empirical supply analysis. We conclude that, in many cases, improved market information services may more economically provide the substantial part of the social benefits of price stabilisation.

Suggested Citation

  • Scandizzo, Pasquale Lucio & Hazell, Peter B.R. & Anderson, Jock R., 1983. "Producers' Price Expectations and the Size of the Welfare Gains from Price Stabilisation," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 51(02), pages 1-15, August.
    • Handle: RePEc:ags:remaae:12452
    DOI: 10.22004/ag.econ.12452
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    References listed on IDEAS

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    1. Benton F. Massell, 1969. "Price Stabilization and Welfare," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 83(2), pages 284-298.
    2. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
    3. Willig, Robert D, 1976. "Consumer's Surplus without Apology," American Economic Review, American Economic Association, vol. 66(4), pages 589-597, September.
    4. Frederick V. Waugh, 1944. "Does the Consumer Benefit from Price Instability?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 58(4), pages 602-614.
    5. P. B. R. Hazell & P. L. Scandizzo, 1974. "Competitive Demand Structures under Risk in Agricultural Linear Programming Models," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 56(2), pages 235-244.
    6. Feder, Gershon, 1977. "The impact of uncertainty in a class of objective functions," Journal of Economic Theory, Elsevier, vol. 16(2), pages 504-512, December.
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    Cited by:

    1. Alston, Julian M. & Freebairn, John W., 1988. "Producer Price Equalization," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 56(03), pages 1-34, December.
    2. Adelman, Irma & Berck, Peter, 1990. "Food security policy in a stochastic world," Journal of Development Economics, Elsevier, vol. 34(1-2), pages 25-55, November.
    3. Rausser, Gordon C. & Chalfant, James A. & Stamoulis, Kostas G., 1985. "Instability in agricultural markets: the U.S. experience," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt5zp3w60h, Department of Agricultural & Resource Economics, UC Berkeley.
    4. Fisher, Brian S., 1985. "Frontiers in Agricultural Policy Research," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 53(02), pages 1-11, August.
    5. Geoff W. Edwards, 1987. "Agricultural Policy Debate: A Survey," The Economic Record, The Economic Society of Australia, vol. 63(2), pages 129-143, June.
    6. Fisher, Brian S., 1983. "Rational Expectations In The Australian Wool Industry," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 27(3), pages 1-9, December.

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