Quotas without supply control: effects of dairy quota policy in California

Sumner, D.A.; Wolf, C.A.

Quotas without supply control: effects of dairy quota policy in California

1996

Sumner, D.A. | Wolf, C.A.

Unlike the federal milk marketing order system, California's system includes a milk quota program. Oddly, this quota restricts neither production nor marketing. In aggregate, the quota program leads to more milk production than a typical marketing quota, but less milk than blend pricing without the quota. The California program generates more producer surplus and smaller welfare losses than a federal-style program without quota. When class 1 milk sales expand, production expands less under the quota program than with blend pricing without a quota. Finally, increases in aggregate quota lower production because they lower the marginal price of milk facing producers.

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