TWO‐TIER PRICING FOR MILK: A RE‐EXAMINATION

L. J. Hubbard

Journal of Agricultural Economics, 1992, vol. 43, issue 3, 343-354

Abstract: Principal objections to two‐tier pricing have centred on administrative complexities and the ‘transparent’ nature of its cost. However, the credibility of two‐tier pricing for milk within the European Community is now enhanced by the existence of a quota scheme and by recent levels of budgetary expenditure. Potential features of two‐tier pricing are that farm support can be more readily directed at selected recipients and that lowering of market prices for milk relieves consumers from some of the burden of this support. A major attraction is that the existing quota system allows for an immediate ready‐made transition. In this paper, two applications are developed. Both allow varying combinations of quota level and support price, but differ in their impact on producers' incomes. Some degree of national flexibility within the Community is also explored.

Date: 1992
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