Short-run supply responses in the US beef-cattle industry

This article investigates the response of beef-cattle producers to changes in the price of cattle. Previous research has suggested that there may be a negative short-run supply response to a permanent increase in the price of cattle. We build a dynamic, rational expectations model that separates the markets for fed and unfed beef. This separation generates predictions that the supply response is generally positive, even for permanent shocks in th e short run, and nests the negative supply response as a special case for a ppropriately restricted demand shocks.