ENDOGENIZING GOVERNMENT BEHAVIOR: EMPIRICAL STUDY OF THE U.S. DAIRY PRICE SUPPORT PROGRAM

The dairy price support program has existed for more than 70 years and the 2002 Farm Bill extends the dairy price support program through the end of 2007. The choice of the support price is a political decision and affects the economics of the U.S. dairy industry. In this research, economic, political, domestic, and international variables that may influence U.S. policymakers' choice of the support price for manufactured dairy products (MDP--butter, cheese and nonfat dry milk) were identified through the development of two models--a behavioral model and a criterion function model. Empirical results of these two models ranked the importance of these variables and compared results.