"Econometric Analysis of Expected Price Formation"
Agricultural Economics, No.5, 1991,
International Association of Agricultural Economists (IAAE)
Summary
This report analyses the process of producers' expected price formation through the estimation of supply functions, using data of vegetables and green tea in Japan as an example.
At first, theoretical analysis shows that the factors which transform the producers' expected price formation from the lagged expectation to the rational expectation are as follows: decrease in information price, increase in managerial ability and/or organizational innovation, rightward shift of supply curve, and increase in price elasticity in supply curve.
Second, supply functions are estimated by using the price expectation formation which includes the rational expectation and the lagged expectation as its extream form.
Consequently, producers' price expectations were found to approach the rational expectations in the case of Chinese cabbage, lettuce and green tea, whose supply curves show high price elasticities, and whose producers' organizations gather price information and monitor the production more than other crops taken in this paper.