Setting the Price of Peruvian Rice

The Peruvian government presently buys and sells most of the domestic and imported rice in Peru. The main goals of its wholesale operation are to keep the farm price of rice high, to maintain a low consumer price, to break even on its wholesale operation, and to reduce rice imports. The conflicts of these goals are illustrated graphically by using a system of iso‐profit and iso‐import curves. A model is provided which allows technical advisors to summarize graphically the information needed by government decision makers when setting rice prices. The model takes into account the variability in supply and demand and is operational even when limited information is available on the government's cost structure.