Premium
Monopsony and Time–Consistency: Sustainable Pricing Policies for Perennial Crops
Author(s) -
Besley Timothy
Publication year - 1997
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/1467-9361.00005
Subject(s) - economics , monopsony , incentive , sunk costs , microeconomics , revenue , flexibility (engineering) , consistency (knowledge bases) , finance , management , geometry , mathematics
Since farmers in developing countries must make sunk investments to produce perennial crops, governments, in the guise of state‐run marketing boards, face constraints on maximal sustinable price which can be charged by a marketing board assuming that “punishments” involve reversion to subsistence by untrusting farmers. This maximal price balances concerns about revenue extraction against the incentive of governments to cheat by capitalizing on sunk investments.