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Abstract

Past acreage response studies have failed to recognize that government control policies have typically introduced taxes and subsidies which are discontinuous over acreage planted. The nature of this discontinuity is reviewed and its impact on profit maximizing choice analyzed. A general model suitable for econometric estimation which would accommodate this discontinuity in policy is introduced. The effect of the discontinuity is to preclude ordinary least squares estimation. An extension of Tobin's maximum likelihood method is introduced to resolve the estimation complications.

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