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CONTRADICTORY PREDICTIONS ON SUPPLY RESPONSE UNDER STABILIZATION: A RECONCILIATION
Author(s) -
Quiggin John C.
Publication year - 1991
Publication title -
australian journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.683
H-Index - 49
eISSN - 1467-8489
pISSN - 0004-9395
DOI - 10.1111/j.1467-8489.1991.tb00510.x
Subject(s) - yield (engineering) , economics , work (physics) , microeconomics , neoclassical economics , physics , thermodynamics
Two separate bodies of literature on stabilization give radically different results, yet these contradictions have not attracted any attention. The first arises from the neoclassical theory of stabilization and predicts that beneficial stabilization will always attract positive supply response. The second arises from the work of Newbery and Stiglitz and predicts 'perverse' supply response for highly risk averse producers. In this paper, the differences which yield these results are described and some suggestions are made for a generalized model.