Measurement of Consumer Gains from Market Stabilization

Brian Wright (bwright@berkeley.edu) and Jeffrey C. Williams

American Journal of Agricultural Economics, 1988, vol. 70, issue 3, 616-627

Abstract: For most cases of practical significance in which partial equilibrium analysis is appropriate, there is little difference between exact measures of consumer gains from market stabilization and approximations such as expected change in marshallian or hicksian consumer surplus. Careful specification of the nature of stabilization is more crucial than the choice of welfare measure. It is important to represent correctly the demand curvature and supply response and to determine whether general equilibrium responses can be ignored. In any event, an improved analytical approximation and a simple numerical method for calculating the exact measures make it unnecessary to rely on suspect measures.

Date: 1988
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