Conflict over cooperation: why so much disagreement over the proposed Dairy Market Stabilization Program? Why so much Disagreement over the proposed dairy market Stabilization program?

Jeremy Jay Jackson, Cameron S. Thraen, Marin Bozic

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

Abstract

The creation of a Dairy Market Stabilization Program (DMSP) is a current topic of contention in the discussion of United States federal dairy policy. DMSP is designed to speed up income over feed cost (IOFC) margin recovery through triggered disincentives for milk production. This federally mandated supply control with its priceenhancing benefits to producers has proven to be controversial. The controversy surrounding DMSP implementation is illuminated by the construction of a stylized prisoner's dilemma game in which DMSP acts as an enforceable commitment mechanism to restrict supply and prop up prices when feed costs experience an adverse shock. Volatile and high feed costs are likely to be the norm for the foreseeable future resulting in large expected benefits to milk producers if DMSP is implemented. The game shows that differing dairymanagement styles lead to different incentives regarding DMSP implementation as producer groups from feedgrowing regions oppose DMSP in an effort to raise the costs of their rivals in feed-buying regions. Opposition toDMSP by feed growers can lead to increased market share and profitability in the future.

Original languageEnglish
Pages (from-to)129-138
Number of pages10
JournalJournal of Agricultural and Food Industrial Organization
Volume11
Issue number1
DOIs
StatePublished - 2013

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