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Negative Milk Supply Response Under Constrained Profit Maximizing Behavior

Published online by Cambridge University Press:  10 May 2017

Loren W. Tauer  and
Harry M. Kaiser
Loren W. Tauer
Affiliation:
Department of Agricultural Economics, Cornell University
Harry M. Kaiser
Affiliation:
Department of Agricultural Economics, Cornell University
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Abstract

A conceptual model is formulated that shows that a downward sloping supply function may exist for a profit maximizing firm facing a cash-flow constraint. The necessary requirement is that at least one factor must be a non-cash input. The model is tested using analysis of variance on two groups of producers from farm record data, one group facing a binding budget constraint the other group not. The results indicate that farms facing a cash flow constraint increase output more than farms not restricted by a cash flow constraint in response to a price decrease.

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Type
Articles
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Northeastern Journal of Agricultural and Resource Economics , Volume 17 , Issue 2 , October 1988 , pp. 111 - 117
Copyright
Copyright © 1988 Northeastern Agricultural and Resource Economics Association 

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Footnotes

G.L. Casler, K.L. Robinson, B.F. Stanton and S.E. Stefanou provided helpful comments.

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