Demand Uncertainty and Price Stabilization

E. Kwan Choi, Stanley R. Johnson
May 1987  [87-WP 23]

Price stabilization is an important policy goal of government intervention in competitive markets. These policies are primarily directed at raising producer income and stabilizing market prices at levels acceptable to consumers and producers (Fox 1956, Turnovsky 1978, Newbery and Stiglitz 1979). Many of the stabilization policy results have been developed from the study of agricultural commodity markets. In these markets, prices tend to be highly variable due to uncertain and inelastic supply and demand (Schultz 1945, Gardner 1981).

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