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Economic Surplus Measurement in Multi-Market Models

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  • Zhao, Xueyan
  • Mullen, John D.
  • Griffith, Garry R.

Abstract

Despite continuing controversy, economic surplus concepts have continued to be used in empirical cost-benefit analyses as measures of welfare to producers and consumers. In this paper, the issue of measuring changes in producer and consumer surplus resulting from exogenous supply or demand shifts in multi-market models is examined using a two-input and two-output equilibrium displacement model. When markets are related through both demand and supply, it is shown that significant errors are possible when conventional economic surplus areas are used incorrectly. The economic surplus change to producers or consumers should be measured sequentially in the two markets and then added up.

Suggested Citation

  • Zhao, Xueyan & Mullen, John D. & Griffith, Garry R., 2005. "Economic Surplus Measurement in Multi-Market Models," Working Papers 12910, University of New England, School of Economics.
  • Handle: RePEc:ags:uneewp:12910
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    File URL: http://purl.umn.edu/12910
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    References listed on IDEAS

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    1. D.J. Hill & Roley R. Piggott & Garry R. Griffith, 1996. "Profitability Of Incremental Expenditure On Fibre Promotion," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 40(3), pages 151-174, December.
    2. Jeffrey T. LaFrance, 1991. "Consumer's Surplus versus Compensating Variation Revisited," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(5), pages 1496-1507.
    3. Xueyan Zhao & John D. Mullen & Gary R. Griffith, 1997. "Functional Forms, Exogenous Shifts, and Economic Surplus Changes," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(4), pages 1243-1251.
    4. Hill, Debbie J. & Piggott, Roley R. & Griffith, Garry R., 1996. "Profitability Of Incremental Expenditure On Fibre Promotion," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 40(03), December.
    5. Daniel T. Slesnick, 1998. "Empirical Approaches to the Measurement of Welfare," Journal of Economic Literature, American Economic Association, vol. 36(4), pages 2108-2165, December.
    6. J. S. Shonkwiler, 1991. "Consumer's Surplus Revisited," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(2), pages 410-414.
    7. Hausman, Jerry A, 1981. "Exact Consumer's Surplus and Deadweight Loss," American Economic Review, American Economic Association, vol. 71(4), pages 662-676, September.
    8. 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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    Citations

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    Cited by:

    1. Mounter, Stuart W. & Griffith, Garry R. & Piggott, Roley R., 2005. "The Payoff from Generic Advertising by the Australian Pig Industry in the Presence of Trade," Australasian Agribusiness Review, University of Melbourne, Melbourne School of Land and Environment, vol. 13.
    2. Xueyan Zhao, 2003. "Who bears the burden and who receives the gain?-The case of GWRDC R&D investments in the Australian grape and wine industry," Agribusiness, John Wiley & Sons, Ltd., vol. 19(3), pages 355-366.
    3. Xayavong, Vilaphonh & Radhakrishnan, Manju & Kingwell, Ross S., 2013. "Development Strategies for a Premium Wine Region of Australia: an application of value chain modelling," 2013 Conference (57th), February 5-8, 2013, Sydney, Australia 152186, Australian Agricultural and Resource Economics Society.
    4. Dent, Siobahn K. & Piggott, Roley R. & O'Donnell, Christopher J. & Griffith, Garry R., 2003. "Does Excluding Cross-commodity Interactions Matter? Beef and Lamb in Australia," 2003 Conference (47th), February 12-14, 2003, Fremantle, Australia 57859, Australian Agricultural and Resource Economics Society.
    5. Mounter, Stuart W. & Griffith, Garry R. & Piggott, Roley R. & Fleming, Euan M. & Zhao, Xueyan, 2008. "An Equilibrium Displacement Model of the Australian Sheep and Wool Industries," Research Reports 37663, New South Wales Department of Primary Industries Research Economists.
    6. X. Zhao & J.D. Mullen & G.R. Griffith & R.R. Piggott & W.E. Griffiths, 2002. "The Economic Incidence of R&D and Promotion Investments in the Australian Beef Industry," Monash Econometrics and Business Statistics Working Papers 16/02, Monash University, Department of Econometrics and Business Statistics.
    7. Xueyan Zhao & John Mullen & Garry Griffith & Roley Piggott & William Griffiths, 2003. "The incidence of gains and taxes associated with R&D and promotion in the Australian beef industry," Agribusiness, John Wiley & Sons, Ltd., vol. 19(3), pages 333-344.

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