A MULTIMARKET BOUNDED PRICE VARIATION MODEL UNDER RATIONAL-EXPECTATIONS - CORN AND SOYBEANS IN THE UNITED-STATES

The bounded prices model under rational expectations is extended to a multimarket setting. Because the resulting rational expectations model is highly nonlinear, Fair and Taylor's iterative procedure is employe d in conjunction with the multimarket framework to obtain maximum like lihood estimates of a supply-demand model for corn and soybeans. The e stimated model is then used to simulate the market equilibrium effects associated with removing price support and acreage set-aside programs over the sample period. Among other things, the results reveal that a creage set-asides have dominated the induced supply effects of price s upport programs for corn.