Effects of Pricing Policy on Colza Production in Iran

Abstract

To investigate the effects of pricing policies in the production of Colza, first, we estimate demand function for inputs of Colza oil production by applying the Almost Ideal ‎Supply System (AISS) and supply ‎function for Colza by applying the Koyck model in Iran during 1989-2009. Then, using the calculated supply and demand elasticities, we compute equilibrium price and ‎quantity for 2008 in the absence of government intervention and‎ compare them with current situation. Finally, we evaluate the effects of floor price policy on the ‎producer surplus for Colza in 2008. The results show that price elasticities ‎of supply of and demands for Colza are greater and less than one, respectively. In addition, the performance of pricing ‎policy is not too effective, since floor price is slightly higher than the equilibrium price. Thus, it is recommended that floor price is determined at a level upper than equilibrium price.

Keywords

• pricing policy
• producer surplus
• system of demand equations
• colza