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Alpaca Lies? Speculative Bubbles in Agriculture: Why They Happen and How to Recognize Them

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  • Tina L. Saitone
  • Richard J. Sexton

Abstract

The speculative bubble phenomenon has been studied extensively by economists and psychologists in recent years. The recent literature is surveyed and extended to enhance the understanding of speculative bubbles in agricultural industries. The analysis is applied to the U.S. alpaca industry, where prices for breeding stock are many times higher than in Peru, home of the world's largest alpaca herd. We present a framework to assess whether current prices for U.S. alpaca stock are supported by market fundamentals or are likely to represent a speculative bubble. Finally, we identify "warning signs" common to agricultural bubbles.

Suggested Citation

  • Tina L. Saitone & Richard J. Sexton, 2007. "Alpaca Lies? Speculative Bubbles in Agriculture: Why They Happen and How to Recognize Them," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 29(2), pages 286-305.
    • Handle: RePEc:oup:revage:v:29:y:2007:i:2:p:286-305.
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    File URL: http://hdl.handle.net/10.1111/j.1467-9353.2007.00343.x
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    References listed on IDEAS

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    1. Jarvis, Lovell S, 1974. "Cattle as Capital Goods and Ranchers as Portfolio Managers: An Application to the Argentine Cattle Sector," Journal of Political Economy, University of Chicago Press, vol. 82(3), pages 489-520, May/June.
    2. Paul Klemperer, 2004. "Auctions: Theory and Practice," Online economics textbooks, SUNY-Oswego, Department of Economics, number auction1.
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    Cited by:

    1. Tolhurst, Tor N., 2018. "A Model-Free Bubble Detection Method: Application to the World Market for Superstar Wines," 2018 Annual Meeting, August 5-7, Washington, D.C. 274387, Agricultural and Applied Economics Association.

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