Imports and the Supply of Winter Tomatoes: An Application of Rational Expectations

Abstract

AbstractA model of the Florida tomato industry is formulated under the hypothesis that growers make production decisions as rational economic agents. This assumption implies that anticipated Mexican tomato imports as well as other economic variables are taken into account when the planting decision is made. Maximum likelihood estimation methods are used to solve the simultaneous equations model, and the implications of the model's reduced form are analyzed. The empirical findings are consistent with the rational expectations hypothesis that producers respond to market information in its entirety when making acreage decisions.