Strategic Aspects of IIASA's Food and Agricultural Model

Gueth, W. & Selten, R. (1981). Strategic Aspects of IIASA's Food and Agricultural Model. IIASA Working Paper. IIASA, Laxenburg, Austria: WP-81-009

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Abstract

The linkage model of IIASA's Food and Agriculture Program (FAP) can be described as an econometric world model which investigates the interaction of many national economies on a number of agricultural markets and one residual nonagricultural market. The model contains a number of policy parameters which can be determined by the national governments in order to improve the economic results. Given that one can specify a goal function for every country, the IIASA linkage model can be thus viewed as a strategic game with the governments of the various countries as players.

In this paper some of the strategic aspects of the IIASA linkage model are investigated. Reasons of analytic tractability made it advisable to study a radically simplified version with only two commodities, food and nonfood, and with rather simple assumptions on government objectives such as short-run minimization of the costs of agricultural policy.

One of the major results is that under apparently weak restrictions on the parameters of our model it is an optimal policy for all countries to supply as much food as possible, which seems to contradict commonly held intuitions. Of course, one still has to determine whether the same result would hold for more complex models and whether the conditions would really be satisfied by econometrically specified model parameters. The basic reason for this counter-intuitive result in our game model is that demand is specified by linear expenditure systems. We therefore suggest alternative demand specifications, which would avoid the difficulties of linear expenditure systems.

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