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

Author

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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), August.
  • Handle: RePEc:ags:remaae:12452
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    References listed on IDEAS

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    1. 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.
    2. 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.
    3. Benton F. Massell, 1969. "Price Stabilization and Welfare," The Quarterly Journal of Economics, Oxford University Press, vol. 83(2), pages 284-298.
    4. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
    5. Willig, Robert D, 1976. "Consumer's Surplus without Apology," American Economic Review, American Economic Association, vol. 66(4), pages 589-597, September.
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    Cited by:

    1. 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.
    2. 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), December.
    3. Rausser, Gordon C. & Chalfant, James A. & Stamoulis, Kostas G., 1985. "Instability in Agricultural Markets: The US Experience," 1985 Conference, August 26-September 4, 1985, Málaga, Spain 182621, International Association of Agricultural Economists.
    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), August.
    5. Fisher, Brian S., 1983. "Rational Expectations In The Australian Wool Industry," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 27(03), December.

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    Keywords

    Demand and Price Analysis;

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