A Note of Clarification on the Role of Yield Uncertainty in Influencing Over-Quota Production

The literature shows that the influence of yield uncertainty on production relative to quota is ambiguous in the case of a single market. This paper uses a two-market framework (quota market and secondary market) with multiplicative yield uncertainty to show that if over-quota production in the absence of yield uncertainty is profitable, then the presence of yield uncertainty is unambiguously a further stimulus to over-quota production, The analysis is discussed in the context of recent changes to the marketing arrangements for Western Australian potatoes.