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Market Equilibrium With Random Production

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  • Gardner, Bruce
  • Chavas, Jean-Paul

Abstract

This paper investigates competitive equilibrium when production is subject to random deviations from. intended output. We find that the most commonly used specification of equilibrium price and output -- the intersection of the demand function and the intended supply function -- is incorrect. This result has possibly - important implications for some areas of current interest, including the literature on gains from price stabilization and the empirical modeling of supply response to risk.

Suggested Citation

  • Gardner, Bruce & Chavas, Jean-Paul, 1979. "Market Equilibrium With Random Production," 1979 Annual Meeting, July 29-August 1, Pullman, Washington 278368, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea79:278368
    DOI: 10.22004/ag.econ.278368
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    File URL: https://ageconsearch.umn.edu/record/278368/files/aaea-1979-124.pdf
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    References listed on IDEAS

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    1. Frederick V. Waugh, 1944. "Does the Consumer Benefit from Price Instability?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 58(4), pages 602-614.
    2. Stephen J. Turnovsky, 1974. "Price Expectations and the Welfare Gains from Price Stabilization," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 56(4), pages 706-716.
    3. P. B. R. Hazell & P. L. Scandizzo, 1975. "Market Intervention Policies When Production Is Risky," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 57(4), pages 641-649.
    4. Benton F. Massell, 1969. "Price Stabilization and Welfare," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 83(2), pages 284-298.
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    Cited by:

    1. Pope, C. Arden & Shumway, C. Richard, 1984. "Management of Intensive Forage-Beef Production Under Yield Uncertainty," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 16(2), pages 37-44, December.
    2. Aradhyula, Satheesh Venkata, 1989. "Policy structure, output supply and input demand for US crops," ISU General Staff Papers 198901010800009909, Iowa State University, Department of Economics.
    3. Shumway, C. Richard, 1983. "Economic Interrelationships in Texas Field Crop Production," Departmental Reports 256827, Texas A&M University, Department of Agricultural Economics.

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