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Market Equilibrium With Random Production

Author

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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

    as
    1. 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.
    2. 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.
    3. 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.
    4. 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.
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    Cited by:

    1. Shumway, C. Richard, 1983. "Economic Interrelationships in Texas Field Crop Production," Departmental Reports 256827, Texas A&M University, Department of Agricultural Economics.
    2. 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.
    3. 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.

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