Distressed Selling by Farmers: Model, Analysis, and Use in Policy-Making

• 成果类型: Article
• 署名作者: Gupta, Shivam; Dawande, Milind; Janakiraman, Ganesh; Sarkar, Ashutosh
• 署名单位: Texas State University System; Texas State University San Marcos; University of Texas System; University of Texas Dallas; Indian Institute of Management (IIM System); Indian Institute of Management Kozhikode
• 刊物名称: PRODUCTION AND OPERATIONS MANAGEMENT
• ISSN/ISSBN: 1059-1478
• DOI: 10.1111/poms.12726
• 发表日期: 2017
• 页码: 1803-1818
• 关键词: agricultural support prices; distressed sales; stochastic dynamic programming; policy tools

摘要

Among the various governmental schemes that support agriculture, support prices have been adopted by many developing countries. A support price for an agricultural crop is a guaranteed price at which a governmental entity agrees to purchase that crop from farmers. Despite this surety, a surprising practice of distressed selling has been widely observed in practice: Farmers sell a significant portion of their crops to outside agents at prices much lower than the support price. We build a tractable stochastic dynamic programming model that captures the salient features of the ground realitieslimited as well as uncertain procurement capacity, high holding costs for the farmers, and lack of affordable creditthat conspire to induce distressed selling and, consequently, a significant loss of welfare of the farmers. Using real data on procurement under a support-price program, we establish the accuracy of our model's prediction on the volume of distressed sales. Finally, we show how our model and its solution can serve as a simple and useful tool for policy-makers to assess the relative impact of the improvements in the main determinants of distressed sales.