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Hedonic Cost Models and the Pricing of Milk Components
Author(s) -
Buccola Steven,
Iizuka Yoko
Publication year - 1997
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 - 10.2307/1244143
Subject(s) - production (economics) , economics , butterfat , news aggregator , marginal cost , milk production , function (biology) , econometrics , agricultural science , microeconomics , agricultural economics , food science , milk fat , zoology , biology , computer science , operating system , evolutionary biology , linseed oil
To assess likely producer response to milk price reform, we examine the technology of protein, butterfat, and fluid carrier production on 1,924 U.S. dairy farms. A variant of a hedonic cost model is proposed in which the output aggregator is expressed as a function of total output and of the percentage concentrations of its components. Dairy farmers have responded rationally to artificially low protein prices. Due to the cow's appetite limit, farmers operate in stage I of feed‐to‐milk production functions; yet protein's marginal cost rises sharply with protein output. Only modest substitutability is evident among feed inputs or milk component outputs.