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Dynamic Equilibrium in Markets for Perennial Crops
Author(s) -
Knapp Keith C.
Publication year - 1987
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 - 10.2307/1241310
Subject(s) - economics , futures studies , perennial plant , partial equilibrium , production (economics) , dynamic equilibrium , general equilibrium theory , econometrics , microeconomics , agronomy , mathematics , thermodynamics , statistics , physics , biology
A dynamic equilibrium model for perennial crop markets is formulated. Price expectations are formed according to perfect foresight, and both the age composition of the crop and the optimal rotation are determined endogenously. The model is applied to the California alfalfa market. The calculated long‐run equilibrium acreage is quite close to average acreage over the base period. The results also exhibit cyclical fluctuations in acreage with a six percent coefficient of variation. Thus, cyclical behavior can arise from technical characteristics of the production process as well as from imperfectly formed expectations or random exogenous shocks.