The theory and measurement of producer response under quotas

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36 Scopus citations

Abstract

Tobin and Houthakker's work on consumer behaviour under quantity rationing has been extended by many authors, especially through the use of duality theory. This paper uses duality theory to extend the work on demand theory under rationing to the case of producer behaviour under quotas. These results permit estimation of otherwise unobservable market supply and demand structures. The structure of the farm economy operating under a tobacco quota system is estimated, and the theory is utilized to infer that the supply elasticity of tobacco would be about 7.0 if the quotas were removed. Estimates such as this are not normally attainable without the theory outlined here, even though they are essential for the evaluation of policy changes. -Authors

Original languageEnglish (US)
Pages (from-to)97-106
Number of pages10
JournalReview of Economics and Statistics
Volume75
Issue number1
DOIs
StatePublished - 1993
Externally publishedYes

ASJC Scopus subject areas

  • Social Sciences (miscellaneous)
  • Economics and Econometrics

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