Producers’ Preference for Price Instability?
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Date
2018-06
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Scientific Research
Abstract
The debate over whether producers prefer price instability to price stability
continues, especially where policies are often endorsed that aim at generating
stability. Such policies include the holding of agriculture commodity stocks by
government to bring about price stability. But why would producers support
such a policy given that producers prefer price instability, or do they? Oi argues
that producers prefer price instability, which is opposite to the conclusion
reached by Massell. In this paper, we take up the issue as to producers’
preference for price instability using the classic welfare economic framework
used by Massell and Just et al. We develop a producer price expectation model
that brings about price stability, which is possible without storage. We use this
as the basis upon which to compare price stability to price instability. Our
conclusion is that producers prefer price instability regardless of whether it is
due to demand or supply shocks.
Description
Keywords
Price Instability, Producer Preferences, Storage
Citation
Theoretical Economics Letters, 2018, 8, 1746-1751