Abstract
A dynamic optimal control model is constructed to study US dairy policy alternatives under bovine somatotropin (bST). The results indicate that the adoption of bST might be slower than that indicated by the early surveys. Even if adoption is widespread, the government can have the potentially large milk surplus problems under control with a combination of price support, generic milk advertising, and a cow buy-out. With bST adoption, the government would set lower support prices and would increase assesment for milk advertising, compared with the no-bST case. The higher adoption rates, the lower the support prices and the higher the advertising assesments. It is found that bST adoption is socially beneficial; consumers gain at the expense of producers. The government can, however, help produces by giving a larger policy weight to producers in setting the optimal levels of policy variables. Finally, it is found that the current levels of generic advertising are too low, and the allocation of advertising bet...
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