Dairy market simulation

This study was designed to be a starting point in the study of the impact of changes in market organization on producers, processors, and consumers of dairy products. A model was constructed for a purely competitive, selfbsufficient, and efficient milk market. Firms and farms are assumed to be money profit maximizers, and the variables are assumed to be linearly related. The data were obtained from the Bureau of Labor Statistics publications and the "Dairy Situation" for the period 1960-1967. Least squares stepwise regression was used to develop a farm supply function, an allocation function, two wholesale supply functions, and two consumer demand functions.Q_tF = 21800 - 2247.7 ^P(t-1)F / ^P(t-1)0
Q_twf = 4004.9 + .124 Q _tF
P_twf / P_to = 3.62 - .00038 Q_twf. + .077 P_tcf/ P _to
P_twm = - .21 - .0000023 Q_twm+ 1.25 P _tcm
P_tcf/P_to = 47.09-.000623 Q_tcf
P _tcm= 1.06 - .0000045 Q _tcmTesting the model consisted of an attempt to retrace the time path covered by the data. The equations generated give calculated values which stabilize after the sixth observation. The study oversimplified the dairy market and left out many factors which could have an important affect on prices and quantities of various dairy products. However, given the objectives of the study, the results were significant.