DOES THE EXISTENCE OF MARKET POWER AFFECT MARKETING LOAN PROGRAMS?

The paper analyzes the effects that a demand with oligopsonistic power may have on the operation of a marketing loan program (especially on the program cost). We measure these effects using a model for the US peanut market where evidence indicates that the demand is highly concentrated. Our results show that the USDA strategy of keeping a repayment rate above the market-clearing price set by the demand is not a sustainable strategy, since the demand can follow a hand-to-mouth strategy, postponing its purchases of peanuts, letting USDA accumulate stocks and forcing it to reduce the price.


Issue Date:
2003
Publication Type:
Conference Paper/ Presentation
PURL Identifier:
http://purl.umn.edu/22241
Total Pages:
27
Series Statement:
Selected Paper




 Record created 2017-04-01, last modified 2017-08-24

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