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Contradictory Predictions On Supply Response Under Stabilization: A Reconciliation

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  • John C. Quiggin

Abstract

Two separate bodies of literature on stabilization give radically different results, yet these contradictions have not attracted any attention. The first arises from the neoclassical theory of stabilization and predicts that beneficial stabilization will always attract positive supply response. The second arises from the work of Newbery and Stiglitz and predicts 'perverse' supply response for highly risk averse producers. In this paper, the differences which yield these results are described and some suggestions are made for a generalized model.
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  • John C. Quiggin, 1991. "Contradictory Predictions On Supply Response Under Stabilization: A Reconciliation," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 35(3), pages 285-294, December.
  • Handle: RePEc:bla:ajarec:v:35:y:1991:i:3:p:285-294 DOI: j.1467-8489.1991.tb00510.x
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    References listed on IDEAS

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    1. Fraser, Rob W., 1988. "A Method For Evaluating Supply Response To Price Underwriting," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 32(01), April.
    2. John C. Quiggin & Jock R. Anderson, 1979. "Stabilisation And Risk Reduction In Australian Agriculture," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 23(3), pages 191-206, December.
    3. 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.
    4. Quiggin, John, 1982. "A Note on the Existence of a Competitive Optimal Output," The Economic Record, The Economic Society of Australia, vol. 58(161), pages 174-176, June.
    5. Quiggin, John C., 1983. "Underwriting Agricultural Commodity Prices," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 27(03), December.
    6. Dardanoni, Valentino, 1988. "Optimal Choices under Uncertainty: The Case of Two-Argument Utility Functions," Economic Journal, Royal Economic Society, vol. 98(391), pages 429-450, June.
    7. Coes, Donald V, 1977. "Firm Output and Changes in Uncertainty," American Economic Review, American Economic Association, vol. 67(2), pages 249-251, March.
    8. Quiggin, John, 1991. "Comparative Statics for Rank-Dependent Expected Utility Theory," Journal of Risk and Uncertainty, Springer, vol. 4(4), pages 339-350, December.
    9. Quiggin, John C & Anderson, Jock R, 1981. "Price Bands and Buffer Funds," The Economic Record, The Economic Society of Australia, vol. 57(156), pages 67-73, March.
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