Unintended Competition from Volume Controls: A Note on the Horne v. Department of Agriculture Decision

Winfree Jason ()
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Winfree Jason: Agricultural Economics and Rural Sociology, University of Idaho, 875 Perimeter Drive MS 2334, 83844, Moscow, ID, USA

Journal of Agricultural & Food Industrial Organization, 2025, vol. 23, issue 1, 59-64

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.

Keywords: marketing orders; volume controls; Cournot; cartels (search for similar items in EconPapers)
JEL-codes: L13 Q18 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1515/jafio-2023-0062

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