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A Cost-Based Model Of Seasonal Production, With Application To Milk Policy

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  • Hennessy, David A.
  • Roosen, Jutta

Abstract

Milk production is seasonal in many European countries. While quantity seasonality poses capacity management problems for dairy processors, a European Union policy goal is to reduce price seasonality. After developing a model of endogenous seasonality, we study the effects of three E.U. policies on production decisions. These are private storage subsidies, production removals, and production quotas. When cost functions are seasonal in a specified way, then arbitrage opportunities interact with storage subsidies to reduce both price and consumption seasonality. But production seasonality likely increases because storage subsidies promote temporal market integration. Conditions are identified under which product market interventions increase quantity seasonality.

Suggested Citation

  • Hennessy, David A. & Roosen, Jutta, 2003. "A Cost-Based Model Of Seasonal Production, With Application To Milk Policy," Hebrew University of Jerusalem Archive 18587, Hebrew University of Jerusalem.
    • Handle: RePEc:ags:hebarc:18587
    DOI: 10.22004/ag.econ.18587
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