Hostname: page-component-77c89778f8-7drxs Total loading time: 0 Render date: 2024-07-20T07:23:09.905Z Has data issue: false hasContentIssue false
  • English
  • Français

Dairy Supply and Factor Demand Response to Output Price Risk: An Econometric Assessment

Published online by Cambridge University Press:  10 May 2017

Yir-Hueih Luh  and
Spiro E. Stefanou
Yir-Hueih Luh
Affiliation:
Department of Agricultural Economics and Rural Sociology, Pennsylvania State University
Spiro E. Stefanou
Affiliation:
Department of Agricultural Economics and Rural Sociology, Pennsylvania State University
Get access

Abstract

The model of production decision making for the expected utility maximizing firm under output price uncertainty is applied to a panel Pennsylvania dairy operators. The model generalized duality implemented in this paper has the advantage of generating a system of supply and variable factor demand functions that consistently account for the presence of output price risk. The application to Pennsylvania dairy operators indicates that output price risk measured by the second and third moments of individual operators’ historical output price series is not an important factor in production decision making. In addition to not maximizing expected utility, these operators are not expected profit maximizers.

Type
Articles
Information
Northeastern Journal of Agricultural and Resource Economics , Volume 18 , Issue 2 , October 1989 , pp. 103 - 108
Copyright
Copyright © 1989 Northeastern Agricultural and Resource Economics Association 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

Journal Series Article No. 8193 of the Pennsylvania Agricultural Experiment Station.

References

Antle, J. M. “Econometric Estimation of Producers’ Risk Attitudes.” American Journal of Agricultural Economics 69 (1987):509–22.Google Scholar
Antonovitz, F. and Roe, T. “Effects of Expected Cash and Futures Prices on Hedging and Production.” Journal of Futures Markets 6 (1986):187–205.Google Scholar
Baron, D. P. “Price Uncertainty. Utility and Industry Equilibrium Under Pure Competition.” International Economic Review 11 (1970):463–80.Google Scholar
Batra, R. N. and Ullah, A. “Competitive Firm and the Theory of Input Demand Under Price Uncertainty.” Journal of Political Economy 82 (1974):537–48.Google Scholar
Behrman, J. R. Supply Response in Underdeveloped Agriculture. Amsterdam: North-Holland, 1968.Google Scholar
Brorsen, B. W., Chavas, J.-P., Grant, W. R., and Schnake, L. D. “Marketing Margins and Price Uncertainty: The Case of the U.S. Wheat Market.” American Journal of Agricultural Economics 67 (1985):521–28.Google Scholar
Brorsen, B. W., Chavas, J.-P., and Grant, W. R. “A Market Equilibrium Analysis of the Impact of Risk on the U.S. Rice Industry.” American Journal of Agricultural Economics 69 (1987):733–39.Google Scholar
Chavas, J.-P. and Pope, R. D. “Price Uncertainty and Competitive Firm Behavior: Testable Hypotheses From Expected Utility Maximization.” Journal of Economics and Business 37 (1985):1–13.Google Scholar
Gallant, A. R., and Jorgenson, D. W. “Statistical Inference for a System of Simultaneous, Nonlinear, Implicit Equations in the Context of Instrumental Variable Estimation.” Journal of Econometrics 4 (1979):275–302.Google Scholar
Hallberg, M. C. “Cyclical Instability in the U.S. Dairy Industry Without Government Regulations.” Agricultural Economics Research 34 (1982):1–11.Google Scholar
Just, R. E. “An Investigation of the Importance of Risk in Farmer's Decisions.” American Journal of Agricultural Economics 56 (1974):14–25.Google Scholar
LaFrance, J. and DeGorter, H. “Regulations in a Dynamic Market: The U.S. Dairy Industry.” American Journal of Agricultural Economics 67 (1985):821–32.Google Scholar
Paris, Q. “Long-Run Comparative Statics Under Output and Land Price Uncertainty.” American Journal of Agricultural Economics 70 (1988):133–41.Google Scholar
Pope, R. D. “The Expected Utility Hypothesis and Demand-Supply Restrictions.” American Journal of Agricultural Economics 60 (1978):619–27.Google Scholar
Pope, R. D. “The Generalized Envelope Theorem and Price Uncertainty.” International Economic Review 21 (1980):75–86.Google Scholar
Pope, R. D. and Kramer, R. A. “Production Under Uncertainty and Factor Demands for the Competitive Firm.” Southern Economic Journal 46 (1979):489–501.Google Scholar
Sandmo, A. “On the Theory of the Competitive Firm under Price Uncertainty.” American Economic Review 61 (1971):65–73.Google Scholar
Stefanou, S. E. and Saxena, S. “Education, Experience and Allocative Efficiency: A Dual Approach.” American Journal of Agricultural Economics 70 (1988):338–45.Google Scholar
Tauer, L. W. and Kaiser, H. M. “Negative Milk Supply Response Under Constrained Profit Maximizing Behavior.” Northeastern Journal of Agricultural and Resource Economics 17 (1988):111–17.Google Scholar
Theil, H. “The Independent Inputs of Production.” Econometrica 45 (1977):1303–38.Google Scholar
Traill, B. “Risk Variables in Econometric Supply Response Models.” Journal of Agricultural Economics 29 (1978):53–61.Google Scholar
USDA, Agricultural Statistics, various issues.Google Scholar