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Endogenous Price Policies and International Wheat Prices
Author(s) -
Sarris Alexander H.,
Freebairn John
Publication year - 1983
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.2307/1240867
Subject(s) - economics , cournot competition , welfare , microeconomics , international economics , monetary economics , market economy
International prices are modeled as Cournot equilibrium interactions of national excess demand functions, which, in turn, are solutions of domestic welfare optimization problems. It is shown that interaction of national policies can lead to excess depression and instability of both international and domestic prices. The model is estimated for wheat and is used to show that, under free trade, average world prices would be much higher while price instability would be much lower. Furthermore, the European Economic Community policies alone contribute about 80% to these distortions.