Consumer and Welfare Losses from Milk Marketing Orders

Abstract

Consumer and welfare losses from milk marketing orders in 1985 including their impact on the sale of reconstituted milk are estimated. Results indicate that consumers pay higher prices for fluid milk and lower prices for manufactured milk products than they would under a competitive system. The net loss in consumer surplus ranges from $621 million to $851 million while the absolute welfare loss ranges from $343 million to $608 million. In addition, existing provisions of milk marketing orders effectively prohibit the use of reconstituted milk, an innovation that could ensure adequate and low cost supplies of fluid milk through the year and have many of the same effects as eliminating milk marketing orders.