Alpaca Lies? Speculative Bubbles in Agriculture: Why They Happen and How to Recognize Them

Tina L. Saitone and Richard J. Sexton

Review of Agricultural Economics, 2007, vol. 29, issue 2, pages 286-305

Abstract: The speculative bubble phenomenon has been studied extensively by economists and psychologists in recent years. The recent literature is surveyed and extended to enhance the understanding of speculative bubbles in agricultural industries. The analysis is applied to the U.S. alpaca industry, where prices for breeding stock are many times higher than in Peru, home of the world's largest alpaca herd. We present a framework to assess whether current prices for U.S. alpaca stock are supported by market fundamentals or are likely to represent a speculative bubble. Finally, we identify "warning signs" common to agricultural bubbles. Copyright 2007 American Agricultural Economics Association

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