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Theory and Measurement of Producer Response under Quotas, The

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  • Lilyan E. Fulginiti
  • Richard K. Perrin

Abstract

Tobin and Houthakker's (1950-51) work on consumer behavior under quantity rationing has been extended by many authors, especially through the use of duality theory. This paper uses duality theory to extend the work on demand theory under rationing to the case of producer behavior under quotas. These results permit estimation of otherwise unobservable market supply and demand structures. The structure of the farm economy operating under a tobacco quota system is estimated, and the theory is utilized to infer that the supply elasticity of tobacco would be about 7.0 if the quotas were removed. Estimates such as this are not normally attainable without the theory outlined here, even though they are essential for the evaluation of policy changes.

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  • Lilyan E. Fulginiti & Richard K. Perrin, 1992. "Theory and Measurement of Producer Response under Quotas, The," Food and Agricultural Policy Research Institute (FAPRI) Publications (archive only) 92-wp94, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    • Handle: RePEc:ias:fpaper:92-wp94
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    1. Muellbauer, John & Portes, Richard, 1978. "Macroeconomic Models with Quantity Rationing," Economic Journal, Royal Economic Society, vol. 88(352), pages 788-821, December.
    2. Neary, J. P. & Roberts, K. W. S., 1980. "The theory of household behaviour under rationing," European Economic Review, Elsevier, vol. 13(1), pages 25-42, January.
    3. Robert A. Pollak, 1969. "Conditional Demand Functions and Consumption Theory," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 83(1), pages 60-78.
    4. Rucker, Randal R. & Thurman, Walter N. & Sumner, Daniel A., 1990. "Production Rights with Limited Transferability: A Case Study of the U. S. Tobacco and Peanut Programs," 1990 Annual meeting, August 5-8, Vancouver, Canada 271050, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    5. Giancarlo Moschini, 1988. "A Model of Production with Supply Management for the Canadian Agricultural Sector," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 70(2), pages 318-329.
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