A Risk Generated Non-Linear Cobweb

Jean-Marc Boussard ()

No 198193, 1997 Occasional Paper Series No. 7 from International Association of Agricultural Economists

Abstract: With risk averse producers, the traditional cobweb model becomes non-linear. The currently produced quantity is an homographic function of previous years' quantities. This may result in the market generating chaotic price and quantity series, especially if demand is rigid. Hedging facilities are unable to reduce the magnitude of fluctuations, which are socially detrimental, especially from the consumers' point of view. This justifies public intervention in markets such as those for staple food commodities or health care.

Keywords: Risk; and; Uncertainty (search for similar items in EconPapers)
Pages: 317
Date: 1997
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Persistent link: https://EconPapers.repec.org/RePEc:ags:iaaeo7:198193

DOI: 10.22004/ag.econ.198193

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