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Acreage Decisions under Marketing Quotas and Yield Uncertainty

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  • Bruce A. Babcock

Abstract

A conceptual model examines how quotas and yield uncertainty affect acreage decisions. Production in excess of a quota can occur if the price for quota production is large relative to marginal costs. Increasing risk aversion increases expected production further if the risk of forfeiting quota revenue is given greater weight than avoiding production risk. Allowing quota carryover decreases production levels. Simulations indicate the most important factors determining expected production levels are (a) the existence of a carryover provision, (b) the price differential given to quota production relative to nonquota production, and (c) the level of marginal costs relative to the quota price.

Suggested Citation

  • Bruce A. Babcock, 1990. "Acreage Decisions under Marketing Quotas and Yield Uncertainty," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(4), pages 958-965.
    • Handle: RePEc:oup:ajagec:v:72:y:1990:i:4:p:958-965.
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    File URL: http://hdl.handle.net/10.2307/1242627
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    Cited by:

    1. Hennessy, David A. & Wei, Wei, 2000. "Decisions and tradable production quota when yield is uncertain," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 44(2), pages 1-15.
    2. Bontems, Philippe & Nauges, Céline, 2017. "Production choices with water markets: The role of initial allocations and forward trading," TSE Working Papers 17-812, Toulouse School of Economics (TSE).
    3. Tabares Elizabeth & Ramón Rosales, 2005. "Políticas de control de oferta de coca: la zanahoria" y "el garrote""," Revista Desarrollo y Sociedad, Universidad de los Andes,Facultad de Economía, CEDE, May.
    4. Philippe Bontems & Celine Nauges, 2018. "Production choices with water markets and risk aversion: the role of initial allocations and forward trading," Post-Print hal-02349932, HAL.
    5. Baldursson, Fridrik M & von der Fehr, N.-H.M.Nils-Henrik M, 2004. "Price volatility and risk exposure: on market-based environmental policy instruments," Journal of Environmental Economics and Management, Elsevier, vol. 48(1), pages 682-704, July.

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