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Does The Existence Of Market Power Affect Marketing Loan Programs?

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  • Revoredo-Giha, Cesar
  • Fletcher, Stanley M.

Abstract

The paper analyzes the effects that a demand with oligopsonistic power may have on the operation of a marketing loan program (especially on the program cost). We measure these effects using a model for the US peanut market where evidence indicates that the demand is highly concentrated. Our results show that the USDA strategy of keeping a repayment rate above the market-clearing price set by the demand is not a sustainable strategy, since the demand can follow a hand-to-mouth strategy, postponing its purchases of peanuts, letting USDA accumulate stocks and forcing it to reduce the price.

Suggested Citation

  • Revoredo-Giha, Cesar & Fletcher, Stanley M., 2003. "Does The Existence Of Market Power Affect Marketing Loan Programs?," 2003 Annual meeting, July 27-30, Montreal, Canada 22241, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea03:22241
    DOI: 10.22004/ag.econ.22241
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    References listed on IDEAS

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