Affiliation:
1. Agricultural Economics and Rural Sociology , University of Idaho , 875 Perimeter Drive MS 2334, 83844 , Moscow , ID , USA
Abstract
Abstract
The U.S. Supreme Court case, Horne v. Department of Agriculture, dealt with the legality of volume controls in the raisin industry. Marketing orders and volume controls in agricultural markets have a long history in the United States and have often been used to decrease price volatility. However, some have seen these volume controls as engaging in cartel behavior. Using a Cournot model, this paper shows that volume controls used by agricultural marketing orders can be profit reducing under some conditions. If producers anticipate a restriction in the production that is allowed to go into the market on a prorated basis, initial production may increase, which can lower profits. Counter intuitively, volume controls can even increase the quantity sold in the market and lower the price.
Reference26 articles.
1. Balagtas, J. V., and D. A. Sumner. 2005. Dissipation of Regulatory Rents: How Milk Marketing Orders Made Milk Producers Worse off, 2005–17756. West Lafayette: Purdue University Agricultural Research Programs, ARP.
2. Boyce, J. R. 2014. “The Effect of Monopsony Power on Prorationing and Unitization Regulation of the Common Pool.” Natural Resource Modeling 27 (3): 429–65. https://doi.org/10.1111/nrm.12042.
3. Cave, J., and S. W. Salant. 1995. “Cartel Quotas under Majority Rule.” The American Economic Review 85 (1): 82–102.
4. Chalfant, J. A., and R. J. Sexton. 2002. “Marketing Orders, Grading Errors, and Price Discrimination.” American Journal of Agricultural Economics 84 (1): 53–66. https://doi.org/10.1111/1467-8276.00242.
5. Crespi, J. M., and A. Chacón-Cascante. 2004. “Do Us Marketing Orders Have Much Market Power? an Examination of the Almond Board of California.” Agribusiness: International Journal 20 (1): 1–15, https://doi.org/10.1002/agr.10081.