Quadratic Programming Solution of Competitive Equilibrium for U.S. Agriculture

Harry H. Hall, Earl O. Heady and Yakir Plessner

American Journal of Agricultural Economics, 1968, vol. 50, issue 3, 536-555

Abstract: A quadratic programming model is applied to the solution of a competitive equilibrium for the field-crops sectors of U.S. agriculture. The analysis is based on nine spatially separated markets, with separate demand functions for six commodities in each. The objective of the programming model is to maximize net profits ( total revenue minus production costs, land rents, and transportation costs) derived from satisfying the endogenously determined demand in the various markets. This objective is subject to the constraints on land availability, demand functions, and the competitive equilibrium condition that product price not exceed marginal cost. The empirical results are consistent in the sense that programmed equilibrium prices are considerably lower than actual prices in the base year, 1965. Even under equilibrium at relatively low prices, surplus land is indicated in the Southeastern and Great Plains states. The results suggest the potential for various policy applications, including the analysis of potential short-run prices in the presence or absence of "free market" equilibrium.

Date: 1968
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Persistent link: https://EconPapers.repec.org/RePEc:oup:ajagec:v:50:y:1968:i:3:p:536-555.

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