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The Australian Wool Corporation's Reserve Price Scheme: An Assessment of Price Stabilisation and Producer Benefits

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  • Fraser, R.W.
  • Murrell, A.J.

Abstract

This paper presents a new framework for evaluating the producer benefits from price stabilisation schemes. The methodology includes formulae for explicitly characterising the floor price feature typical of such schemes. This methodology is applied to an analysis of the Australian Wool Corporation's (AWC) Reserve Price Scheme (RPS) for wool. Using post intervention data to generate values of ex ante (unstabilised) and ex post (stabilised) price variability, results indicate that the coefficient of variation of wool prices has declined in response to the operation of the RPS by 41 per cent. A large decrease in price instability from historical levels to the level estimated in this paper is also observed. It is suggested that some of this reduction in price instability may be attributed to an existence effect of the RPS. As a consequence, ignoring this existence effect may lead to an understatement of the benefits from price stabilisation.

Suggested Citation

  • Fraser, R.W. & Murrell, A.J., 1990. "The Australian Wool Corporation's Reserve Price Scheme: An Assessment of Price Stabilisation and Producer Benefits," Discussion Papers 232295, University of Western Australia, School of Agricultural and Resource Economics.
    • Handle: RePEc:ags:uwapdp:232295
    DOI: 10.22004/ag.econ.232295
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    References listed on IDEAS

    as
    1. Rob W. Fraser, 1986. "Supply Responses, Risk Aversion And Covariances In Agriculture," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 30(2-3), pages 153-156, 08-12.
    2. 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(1), pages 1-15, April.
    3. Campbell, Rachel & Gardiner, B. & Haszler, Henry, 1980. "On The Hidden Revenue Effects Of Wool Price Stabilisation In Australia: Initial Results," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 24(1), pages 1-15, April.
    4. Fraser, Rob W., 1986. "Supply Responses, Risk Aversion And Covariances In Agriculture," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 30(2-3), pages 1-4, August.
    5. Rob W. Fraser, 1988. "A Method For Evaluating Supply Response To Price Underwriting," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 32(1), pages 22-36, April.
    6. Gary E. Bond & Bernard Wonder, 1980. "Risk Attitudes Amongst Australian Farmers," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 24(1), pages 16-34, April.
    7. Mike Hinchy & Brian S. Fisher, 1988. "Benefits from Price Stabilization to Producers and Processors: The Australian Buffer-Stock Scheme for Wool," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 70(3), pages 604-615.
    8. Paul R. Krugman, 1987. "Trigger Strategies and Price Dynamics in Equity and Foreign Exchange Markets," NBER Working Papers 2459, National Bureau of Economic Research, Inc.
    9. R. Campbell & B. Gardiner & H. Haszler, 1980. "On The Hidden Revenue Effects Of Wool Price Stabilisation In Australia: Initial Results," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 24(1), pages 1-15, April.
    10. Bond, Gary E. & Wonder, Bernard, 1980. "Risk Attitudes Amongst Australian Farmers," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 24(1), pages 1-19, April.
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