A simple linear programming framework is used to simulate various forms of cooperation between representative farms of two villages in prewar China. The results suggest that even though the two farms individually were quite efficient revenue maximizers, significant mutual benefit would result from the formation of an elementary agricultural producers' cooperative. A move to an advanced cooperative in which dividend payments for land brought into the cooperative initially would be eliminated and income distributed solely according to labor contribution, however, would meet with strong resistance because a sizeable income loss would be involved for the farm with the larger initial land endowment.
Dennis R. Starleaf, A Comment on "Nonmember Banks and Empirical Measures of the Variability of Reserves and Money: A Theoretical Appraisal", The Journal of Finance, Vol. 35, No. 3 (Jun., 1980), pp. 801-805
Dennis W. Carlton, Glenn C. Loury; The Limitations of Pigouvian Taxes as a Long-Run Remedy for Externalities*, The Quarterly Journal of Economics, Volume 9
IN A RECENT PAPER D. R. Capozza and R. Van Order (C.V.) [1] claim to show that there exist conditions under which a competitive firm in industry equilibrium in a spatial environment will charge a higher mill price than a spatial monopolist. This conclusion seems contrary to our intuition and consequently the conditions under which it arises should be made very clear. This paper argues that the C.V. result is not necessarily correct. In particular, there is an apparent error in the three sentences following equation (27). The positive roots of equation (27) are both possible candidates for equilibrium price.2 The difficulty is that there are no grounds for choosing between the two roots within the structure of the model. Capozza has argued, in correspondence, that the smaller root is inappropriate because demand is negative. However, demand is only negative at the border of the market area and one could equally well argue that this is a case of natural monopoly, induced by the cost structure. These remarks are made within the assumptions that C.V. makq in their paper. We can, however, shed further light on the matter by introducing some new elements. In particular, (i) we explicitly impose some simple dynamics on the system, and (ii) we use consumer surplus as a measure cf welfare. (i) Let us suppose that firms are price setters and assume a zero conjectural variation. Under these conditions it is not difficult to show that the larger positive root is stable and the smaller is unstable. (ii) The total of consumer surplus at price m and market radius Do is given by