Title of the Talk: Price Subsidies with or without Physical Procurement: Impact on Quality, Profits, and Welfare
Speaker: Prof. Omkar D. Palsule-Desai, Indian Institute of Management Indore
Day, Date, and Time: Thursday, August 17th, 2023, 9:30 AM to 10:30 AM.
Venue: Seminar room IE 211, Second Floor, IEOR Building.
Abstract:
Problem definition: Newly introduced price subsidy programs without physical procurement have resulted in an increased (vis-\`{a}-vis the subsidy programs with physical procurement) preponderance of deliberate quality degradation for certain crops by Indian farmers. The physical procurement of the crop from farmers provides an alternate sales channel to farmers enabling the government to subdue the competition between the farmers in the open market. The farmers’ deliberate quality degradation may moderate the benefits of the altered competitive structure. The viability of such programs has been questioned, and policymakers are looking for guidance.
Methodology/results: Using a multi-stage incomplete information-based (Bayesian) game-theoretic model, we comprehensively characterize the farmers’ strategic production and selling decisions. We demonstrate that the government price support with multiple sales channels created by physically procuring the crop improves the producer surplus when the farmers’ landholdings are highly disparate and the quality-based competition is lower. A higher minimum support price (MSP), a higher landholding for a farmer producing a high-quality crop, and a lower high-quality crop price premium in the open market improve the consumer surplus, the social surplus, and the average quality of the crops supplied by farmers when the government does not procure the crop physically v/s when it does. To eliminate farmers’ deliberate crop quality degradation, when MSP is moderate, if not lower, the government should (should not) procure the crop physically if the high-quality crop price premium in the open market is higher (lower).
Managerial implications: We provide guidance to the government and policymakers exercising caution in selecting MSP and the farmer subsidy program. We demonstrate that managers and policymakers can counter farmers’ strategic behavior in crop production and supply by altering a crop procurement policy based on physical procurement.
Speaker Bio: Omkar has been associated with the Indian Institute of Management Indore since August 2010 as faculty in the area of Operations Management & Quantitative Techniques. He completed the Fellow Programme in Management from the Indian Institute of Management Ahmedabad in March 2010 with specialization in the Production and Quantitative Methods area. He was also associated with EADS-SMI Center at the Indian Institute of Management Bangalore as a Post-Doctoral Fellow during April 2009 and August 2010. Before joining the doctoral program at IIMA, he worked with Delphi - General Motors, Michigan, USA as an Industrial Engineer. He also holds a Master of Science degree in Industrial & Systems Engineering from University of Florida, USA and a Bachelor of Engineering degree from V.J.T.I., Mumbai University. Omkar’s primary research interests are in the area of operations and supply chain management with an emphasis on analytical model-building techniques from domains such as operations research and game theory that are complemented by empirical methods. In recent years, he has been primarily focusing on developing efficient mechanisms and policymaking in an ecosystem of interest using scientific analytical techniques.