The equations ensure that supply and demand balance at the aggregate and individual milk shed levels. The Lerner index is incorporated to model monopsony behavior. Private monopsony parameters used in the system are estimated econometrically. A private equilibrium is also predicted with a modified firm cost structure reflecting reduced impacts of institutional constraints. Findings show that private and public firms are exercising monopsony power.
Total surplus falls slightly because private cheese is lower quality.
The simultaneous equation system developed to predict the private market equilibrium for post agro-industry privatization has the potential to be extended to solve a broader range of economic problems. The equation system can be adapted to applications where there are multiple production regions and monopsony behavior varies by regional characteristics. The author grants to Virginia Tech or its agents the right to archive and display their thesis or dissertation in whole or in part in the University Libraries in all forms of media, now or hereafter known. The author retains all proprietary rights, such as patent rights.