Volume 20, Issue 2, December 1995

December, 1995

DETERMINANTS OF COW-CALF PAIR PRICES

By: Parcell, Joseph L.; Schroeder, Ted C.; Hiner, Frina D.
Cow-calf prices are determined by interaction of many factors. At a particular auction, cow-calf pair prices often had a range of 75% of the mean price. This variability suggests that producers need to be informed regarding cow-calf price determinants. This study uses auction data during 1993 to estimate price differentials associated with cow-calf pair characteristics using a hedonic model. Cow breed, age, health, conditions, horns, frame, and whether the cow had been bred back were significant price determinants. Calf weight, health, and frame had significant price impacts. Highest prices were paid for pens containing 9-December pairs of young Angus, dehorned, bred back, healthy cows with heavy healthy calves.
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December, 1995

END MATERIALS

This section includes: JARE Editor's Report for 1994-95; Reviewers, July 1994-June 1995; WAEA 1994 Award Winners; Past Presidents, Western Agricultural Economics Association, 1927-94; Past Editors; Guidelines for Submitting Manuscripts to JARE; Membership Information; Back Cover
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December, 1995

TECHNICAL EFFICIENCY OF RURAL WATER UTILITIES

By: Bhattacharyya, Arunava; Harris, Thomas R.; Narayanan, Rangesan; Raffiee, Kambiz
Technical efficiency of rural water utilities is determined using frontier production functions. An indirect production function is developed to model the two-step production process of a local government-controlled firm. Data from 26 rural Nevada water utilities are used to estimate inefficiency in terms of firm-specific variables. A multistep estimation procedure is used instead of single-step maximum likelihood estimation. Model selection tests are used to choose the best model. Privately owned utilities are most efficient; self-governing water districts are the least efficient. Municipal governments operate the most and least efficient utilities.
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December, 1995

A RANGELAND GRASSHOPPER INSURANCE PROGRAM

By: Skold, Melvin D.; Davis, Robert M.
The incidence of benefits and costs from controlling rangeland grasshoppers on public grazing lands poses problems of economic efficiency and distributional equity. Public grasshopper control programs operate like public disaster assistance. However, grasshopper infestations are an insurable risk. This article proposes a rangeland grasshopper insurance program which reduces the economic inefficiencies and distributional inequities of the existing program.
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December, 1995

AGRICULTURAL PRODUCERS’ WILLINGNESS TO PAY FOR REAL-TIME MESOSCALE WEATHER INFORMATION

By: Kenkel, Philip L.; Norris, Patricia E.
Mesoscale weather networks can provide improved weather information to agricultural producers. This technology can potentially improve production decisions, reduce irrigation and pesticide inputs, and reduce weather-related losses. Developing a mesoscale network to disseminate real-time mesoscale weather information requires a substantial investment. In addition, there are costs associated with maintenance of the system and distribution of the information available. While public funds may be available to support initial development of the system, there may be less public support initial development of the system, there may be less public support for maintaining the system and subsidizing users' access to the information. This study uses the contingent valuation technique to determine the willingness of Oklahoma farmers and ranchers, as one set of potential users, to pay for real-time mesoscale weather information. The results indicate that agricultural producers are willing to pay only a modest fee for improved weather information. Gross sales, irrigation, and past weather losses are among the factors shown to significantly impact willingness to pay.
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December, 1995

TRANSACTION COSTS AND AGRICULTURAL NONPOINT-SOURCE WATER POLLUTION CONTROL POLICIES

By: Smith, Rodney B.W.; Tomasi, Theodore D.
Mechanism design theory is used to develop the properties of optimal pollution control incentive schemes in the presence of adverse selection, moral hazard, and transaction costs. The model presented here shows (a) with no deadweight costs (transaction costs) , first-best allocations are always possible; (b) in the presence of transaction costs (caused by raising taxes), only second-best allocations are feasible; and (c) the conditions under which the optimal incentive scheme implementing second-best allocations will be a nonlinear tax, a standard(s), or a combination of both taxes and standard(s).
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December, 1995

RURAL-TO-URBAN WATER TRANSFERS: MEASURING DIRECT FOREGONE BENEFITS OF IRRIGATION WATER UNDER UNCERTAIN WATER SUPPLIES

By: Taylor, R. Garth; Young, Robert A.
Irrigation water from a southeastern Colorado county has been sold to distant municipalities. The county's junior water right delivered limited and uncertain water supplies which were used on relatively poor soils. The ability of water markets to allocate water to the highest-valued use was addressed by assessing the direct foregone benefits of the transfer using deterministic and discrete stochastic sequential (DSSP) programming models. Crop mix predicted by the DSSP followed observed regional patterns. The DSSP was thus used to derive regional water demand from which foregone value was estimated. Direct regional foregone agricultural benefits were relatively low-due to uncertain water supplies and unproductive soils-indicating the market selected a low-valued supply for transfer.
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December, 1995

NONLINEAR DYNAMICS AND ECONOMIC INSTABILITY: THE OPTIMAL MANAGEMENT OF A BIOLOGICAL POPULATION

By: Chavas, Jean-Paul; Holt, Matthew T.
Assuming a competitive market, conditions are determined for when a steady-state equilibrium does not exist in the optimal dynamic management of a biological population. Irregular and unpredictable behavior (called "chaos") can arise from fully rational economic decision making. High interest rate, adjustment costs, and an inelastic demand can contribute to market instability.
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December, 1995

MARKET CONDUCT UNDER GOVERNMENT PRICE INTERVENTION IN THE U.S. DAIRY INDUSTRY

By: Liu, Donald J.; Sun, Chin-Hwa; Kaiser, Harry M.
The degree of market power exercised by fluid and manufactured processors in the U.S. dairy industry is estimated. Appelbaum's quantity-setting conjectural variation approach is cast into a switching regime framework to account for the two market regimes created by the existence of the dairy price support program: (a) government supported regime (market price is at the support price) and (b) market equilibrium regime (market price is above the support price). The model is also used to test whether government price intervention has a pro-competitive to anti-competitive influence on market conduct.
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December, 1995

TRADE CREATION AND DIVERSION EFFECTS OF THE NORTH AMERICAN FREE TRADE AGREEMENT OF U.S. SUGAR IMPORTS FROM MEXICO

By: Devadoss, Stephen; Kropf, Jurgen; Wahl, Thomas I.
A world sugar model consisting of 21 countries was developed to determine the effects of NAFTA of U.S. and Mexican sugar markets and to quantify the trade creation and diversion effects on U.S. imports from Mexico. Mexican sugar production increases under NAFTA, causing Mexico to become a net exporter. NAFTA induces sugar imports from Mexico to displace U.S. production, to meet demand expansion, and also to divert U.S. imports from other foreign suppliers to Mexico. Effects of NAFTA on the U.S. sugar market are small because of the side agreements which limit Mexican exports and which include corn sweetener consumption when computing Mexico's production surplus.
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December, 1995

OPTIMAL DESIGN OF A VOLUNTARY GREEN PAYMENT PROGRAM UNDER ASYMMETRIC INFORMATION

By: Wu, JunJie; Babcock, Bruce A.
Green payment programs, where the government pays farmers directly for environmental benefits, are an alternative to the current method of achieving environmental benefits which restricts farming practices in exchange for deficiency payments. This article presents a voluntary green payment program using the principles of mechanism design under asymmetric information. Information asymmetry arises because the government knows only the distribution of farmers' production situations, rather than farm-specific information. The program is demonstrated with irrigated corn production in the Oklahoma high plains. A green payment program can reduce budget costs and pollution, while increasing the net social value of corn production.
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December, 1995

SPILLOVERS AND THE RETURNS TO AGRICULTURAL RESEARCH FOR POTATOES

By: Araji, A.A.; White, Fred C.; Guenthner, Joseph F.
Returns to investments in potato research were estimated for the United States and six subregions. The study combines time-series and cross-sectional data to estimate the supply response for potatoes. Two research variables, research within the state and within the region, were included as exogenous variables to identify spillovers of research results. The rate of return to investments in potato research in the U.S. is estimated at 79%. Of this, 31% accrues to states conducting the research and 69% is accounted for by the spillover effects.
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December, 1995

RECREATIONAL AND AESTHETIC VALUE OF WATER USING HEDONIC PRICE ANALYSIS

By: Lansford, Notie H., Jr.; Jones, Lonnie L.
Historically, water allocation focused on quantities demanded by consumptive uses. As quantity demand grows, efficient allocation among consumptive and nonconsumptive uses becomes more critical. This hedonic approach provides information regarding recreational and aesthetic (RA) value for a central Texas lake. The model indicates several statistically significant RA characteristics of housing; proximity is the most important. Waterfront properties command a premium, but marginal RA price falls rapidly with increasing distance. Marginal RA values are estimated for selected water levels and are found to have a lower marginal price per acre-foot than many agricultural uses.
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