PRICE-BAND STABILIZATION PROGRAMS AND RISK: AN APPLICATION TO THE U.S. CORN MARKET

The impacts of introducing a partial price stabilization scheme in the U.S. corn market are investigated by using a modified version of the bounded price variation model. Specifically, a model is developed and estimated that includes rational expectations of the first three central moments of the (truncated) equilibrium price distribution. The estimated model is used to stimulate market equilibrium effects of introducing upper and lower price limits through a tax-subsidy scheme. The results show that corn producers are downside risk averse, and that market feedback effects of price stabilization can, at times, be more important than direct effects.


Issue Date:
1994-12
Publication Type:
Journal Article
PURL Identifier:
http://purl.umn.edu/30749
Published in:
Journal of Agricultural and Resource Economics, Volume 19, Number 2
Page range:
239-254
Total Pages:
16




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

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