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Abstract

This paper develops a conceptual model of farmers’ production decisions in the context of dual output marketing channels (e.g., government and private sector) when prices at harvest time and the availability of one of the channels are unknown at planting time. It then uses the operationalized model to estimate the marginal effects of Food Reserve Agency (FRA) policies on smallholder behavior in Zambia. Results suggest that increases in the FRA farmgate maize price influence smallholders’ production decisions by raising their expected maize price. Smallholders respond to an increase in the FRA price by both intensifying and extensifying their maize production.

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