On the Deadweight Cost of Production Requirements for Geographically Differentiated Agricultural Products

Authors:
Mérel, PierreR.
Type: Journal Article
Year of publication: 2009
Source: USDA
Collected from: AGRIS
Subject:
agricultural products
products
Description:This article investigates the welfare effects of alternate producer collusion schemes in a context where collusion is authorized in order to cover fixed costs. Using a linear equilibrium displacement model, we find evidence that, when the producer group is allowed to control quota levels, an input quota policy entails a smaller absolute deadweight loss than an output quota policy. This finding suggests that if producer groups are allowed to resort to production-distorting instruments to limit output, they will make production choices that are less costly for society than if they had been allowed to directly control output levels.
 

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