The Influence of Market Sturcture on the Implications of Domestic Subsidies on International Cotton Markets
Ethridge, Don E.
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This analysis uses a residual demand elasticity model to measure market power of the international cotton market. The results indicate that both china and U.S. dominate the cotton price with a higher market power in china compared to the U.S. Those test results combined with a partial equilibrium model of the international cotton market are used to study the welfare consequences of U.S. cotton subsidy policies for major cotton exporters under alternative assumptions about global market structure. The results indicate that the effects of U.S. subsidies on world cotton price are much smaller under monopsony and double power (with china as a monopsony and U.S. as a monopoly) market assumption than those under complete competitive market scenarios.