Volume 20, Issue 1, July 1995

July, 1995

OBLIGATIONS AND PENALTIES UNDER LEMON LAWS: AUTOMOBILES VERSUS TRACTORS

By: Centner, Terence J.; Wetzstein, Michael E.
Distinctive new provisions of tractor lemon laws which create obligations and provide penalties for defective self-propelled agricultural equipment are contrasted with provisions of automobile lemon laws. Lemon-law obligations involve both producers' guarantees to provide consumers with a serviceable vehicle and producers' promise to remedy defects. Due to fewer manufacturer obligations under the tractor lemon laws as opposed to automobile lemon laws, tractors may be expected to have more defects than automobiles. Yet the tractor lemon laws contain fewer penalties in the form of restitution remedies. The inconsistencies of these obligations and penalties suggest tractor laws may be inefficient.
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July, 1995

IMPORTANCE OF MELON TYPE, SIZE, GRADE, CONTAINER, AND SEASON IN DETERMINING MELON PRICES

By: Tronstad, Russell
Classification and Regression Trees (CART), a computer intensive nonparametric classification method, was used to model weekly Los Angeles wholesale prices (1990-93) for twelve different melon types. CART explained more of the variation in melon prices than did an ordinary least squares (OLS) regression with dummy variables. Explanatory variables ranked as the most-to-least important by CART are as follows: week, type of melon, year, size, grade, and shipping container. The most notable price change occurs when prices fall after 13 May.
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July, 1995

REGULATION OF NITROGEN POLLUTION: TAXES VERSUS QUOTAS

By: Choi, E. Kwan; Feinerman, Eli
This paper investigates the effects of first-best policies to regulate nitrogen application. Some nitrogen fertilizer is applied ex ante before a random rainfall, but sidedressed nitrogen may be applied ex post. First-best policy is a tax or a quota on ex ante application, because sidedressed nitrogen is not leached. Since a risk-averse farmer uses more nitrogen ex ante than a risk-neutral farmer, a higher tax must be imposed on the former. Action equivalent first-best taxes and quotas are also welfare equivalent. An empirical model for wheat in Israel was used to demonstrate the analytical findings.
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July, 1995

PROPERTY RIGHTS, GRAZING PERMITS, AND RANCHER WELFARE

By: Lambert, David K.; Shonkwiler, John Scott
This study attempts to link factors affecting the demand for Bureau of Land Management grazing to perceived changes in permittee welfare over the 1962-92 period. Annual demand for federal forage is found to be sensitive to active preference, beef cow and breeding ewe inventories, and grazing fees and nonfee allotment utilization costs. No evidence is found to support the notion that the demand for grazing has been affected by changes in property rights associated with the federal grazing permit that are not reflected in higher user costs. The total decrease in welfare generated from the permit that are not reflected in higher user costs. The total decrease in welfare generated from the permit to graze public lands has been about 9% per authorized cattle animal unit month and 65% per authorized sheep animal unit month over the study period.
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July, 1995

THE EFFECTIVENESS OF U.S. NONPRICE PROMOTION OF ALMONDS IN THE PACIFIC RIM

By: Halliburton, Karen; Henneberry, Shida Rastegari
The effectiveness of the federal government's export promotion programs (the Foreign Market Development Program and the Market Promotion Program) for high value agricultural products is evaluated using U.S. almond exports in the Pacific Rim as a case study. Cross-sectional time-series data are pooled for five Pacific Rim countries. While promotions were ineffective in South Korea and Singapore, some estimations of the import demand model indicate promotions in Japan, Taiwan, and Hong Kong may have been effective.
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July, 1995

LAND ALLOCATION IN THE PRESENCE OF ESTIMATION RISK

By: Lence, Sergio H.; Hayes, Dermot J.
Estimation risk occurs when parameters relevant for decision making are uncertain. Bayes' criterion is consistent with expected-utility maximization in the presence of estimation risk. This article examines optimal (Bayes') land allocations and land allocations obtained using the traditional plug-in approach and two alternative decision rules. Bayes' allocations are much better economically than the other allocations when there are few sample observations relative to activities. Calculation of certainty equivalent returns (CERs) with estimation risk is also discussed and illustrated. CERs are typically (and incorrectly) calculated with the plug-in approach. Plug-in CERs may be extremely misleading.
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July, 1995

PROGRAM AND NONPROGRAM WHEAT ACREAGE RESPONSES TO PRICES AND RISK

By: Krause, Mark A.; Lee, Jung-Hee; Koo, Won W.
Wheat acreage responses to expected wheat price and price risk are reversed for program and nonprogram-planted acreage in the northern plains, central plains, southern plains, and U.S. Expected wheat price has a strong negative effect on program-complying wheat acreage. Government support prices have a positive effect on program-complying and program-planted acreage. Price risk has a positive effect on program-complying wheat acreage and a negative effect on nonprogram-planted acreage. Estimated price elasticities are higher than in studies where risk was ignored.
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July, 1995

RECENT DUALITY CONTRIBUTIONS IN PRODUCTION ECONOMICS

By: Shumway, C. Richard
This article is a limited assessment of the agricultural production economics literature since 1982 that resulted from dual modeling approaches. Contributions have removed several perceived obstacles to dual modeling, such as testing curvature, identifying the technology when prices are collinear, and examining dynamics of production. Some contributions have also removed obstacles to primal modeling. Dual methods have been used in risk applications only recently and still appear less convenient than primal methods. Convenience may become the primary criterion for selecting primal or dual methods.
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July, 1995

THE RHETORIC OF DUALITY

By: Paris, Quirino; Caputo, Michael R.
Agricultural economists' view of duality has often assumed the characteristics of an ambivalent relation. During the eighties, several authors published papers which put in doubt this or that aspects of duality. This study emphasizes the notion that duality is a time-honored approach suitable for solving problems that can be expressed mathematically. Contrary to many assertions that appeared in the agricultural economics literature, duality does not seem to suffer from any theoretical limitations any more than does the formulation of the primal problem. The article presents two problems that can be solved with dual methods. The authors are incapable of deriving the same results using primal approach.
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July, 1995

A PROTOCOL OR A SET OF STANDARDS TO GUIDE AGRICULTURAL ECONOMICS RESEARCH

By: Debertin, David L.; Luzar, E. Jane; Chambers, Orlando D.
This article examines some difficult decisions that agricultural economists must confront in doing research. Over many years, rules and standards have developed in agricultural economics that guide researchers, providing an underlying framework for research methods. This article deals with applying these seldom discussed guidelines to specific research situations confronted by agricultural economists. With this article, we hope to stimulate a dialogue among agricultural economists about the need for additional, appropriate methodological guidelines in agricultural economics research.
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July, 1995

RISK AND MARKET PARTICIPANT BEHAVIOR IN THE U.S. SLAUGHTER-CATTLE MARKET

By: Feuz, Dillon M.; Fausti, Scott W.; Wagner, John J.
Incomplete information generates uncertainty for market participants in the slaughter-cattle market. Buyer and seller behavior in the presence of that uncertainty is examined. Statistically significant risk premiums are charged by packers when buying slaughter cattle on either a live- or dressed-weight basis compared to buying on a grade-and-yield basis. Pratt-Arrow risk-aversion coefficients are calculated for buyers and these remain constant over all marketing methods. Sellers market cattle under all three marketing methods, suggesting producers' attitudes toward risk (risk-aversion coefficients) vary.
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July, 1995

DETERMINANTS OF NUTRIENT DEMAND: A NONPARAMETRIC ANALYSIS

By: Ramezani, Cyrus A.
The influence of socioeconomic variables on nutrient intake is studied using nonparametric procedures that admit estimation of multivariate functions. The analysis indicates a nonlinear relation between intake, age, education, and income. Specifically, intake rises with income reaching an inflection point beyond which it is essentially flat. Socioeconomic variables influence intake primarily at lower income levels. Nonparametric procedures prove useful in avoiding ad hoc specifications that would fail to uncover these findings.
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July, 1995

COMPETITION AND POLICY CONFLICTS IN CANADA-U.S. BARLEY TRADE

By: Johnson, D. Demcey; Wilson, William W.
Changes in policy, institutional and competitive environments have led to increased trade and a rise in trade tensions in the Canada-U.S. barely market. These tensions stem from policies and marketing institutions that have evolved independently in these two countries. Results from a detailed spatial equilibrium model of the Canada- U.S. barley market are presented in this article. Simulations are used to quantify effects of U.S. import restrictions; removal of Canadian rail subsidies, different Export Enhancement Program (EEP) subsidy levels, restoration of Conservation Reserve Program (CRP) acres to U.S. production, and retention of Canadian Wheat Board control over Canadian barley sales - all of which affect trade flows in the barley sector.
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July, 1995

SYSTEM MISSPECIFICATION TESTING AND STRUCTURAL CHANGE IN THE DEMAND FOR MEATS

By: McGuirk, Anya M.; Driscoll, Paul J.; Alwang, Jeffrey Roger; Huang, Huilin
A misspecification testing strategy designed to ensure that the statistical assumptions underlying a system of equations are appropriate is outlined. The system tests take into account information in, and interactions between, all equations in the system and can be used in a wide variety of applications where systems of equations are estimated. The system testing approach is demonstrated by modeling U.S. consumer demand for meats. The example illustrates how the approach can be used to disentangle issues regarding structural change and other forms of model misspecification.
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