Files
Abstract
In this paper, the price dynamics of a rice market are examined using dynamic programming techniques. The model is
parameterised to the case of Bangladesh and thus represents the situation of a very poor country which has characteristically
high price elasticity (due to income effects) and high storage and interest costs. The incentives for private sector storage and its
impact on price stability are examined. Various options for public intervention in the storage sector are also explored, including
price ceiling schemes and subsidisation of storage costs. Results show that interventions that remove private disincentives (such
as storage subsidies) are much cheaper than direct intervention by government, but the impact on the probability distribution
of prices is quite different. The effect of trade on the probability distribution of prices is also examined.
© 2003 Elsevier Science B.V. All rights reserved.