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A Risk Generated Non-Linear Cobweb

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  • Boussard, Jean-Marc

Abstract

With risk averse producers, the traditional cobweb model becomes non-linear. The currently produced quantity is an homographic function of previous years' quantities. This may result in the market generating chaotic price and quantity series, especially if demand is rigid. Hedging facilities are unable to reduce the magnitude of fluctuations, which are socially detrimental, especially from the consumers' point of view. This justifies public intervention in markets such as those for staple food commodities or health care.

Suggested Citation

  • Boussard, Jean-Marc, 1997. "A Risk Generated Non-Linear Cobweb," 1997 Occasional Paper Series No. 7 198193, International Association of Agricultural Economists.
  • Handle: RePEc:ags:iaaeo7:198193
    DOI: 10.22004/ag.econ.198193
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    File URL: http://ageconsearch.umn.edu/record/198193/files/agecon-occpapers-1997-033_1_.pdf
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    References listed on IDEAS

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    1. Tyers,Rod & Anderson,Kym, 2011. "Disarray in World Food Markets," Cambridge Books, Cambridge University Press, number 9780521172318, December.
    2. Tyers, Rod, 1990. "Implicit policy preferences and the assessment of negotiable trade policy reforms," European Economic Review, Elsevier, vol. 34(7), pages 1399-1426, November.
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    Keywords

    Risk and Uncertainty;

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