The impact of quotas on the optimal adjustment of milk production at the farm level: a comment

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Abstract
In a recent article Rasmussen and Nielsen (1985) conclude that a quota-induced reduction in milk production occurs through a decrease in feed per cow and only if this is insufficient is there a reduction in the number of cows. Here it is shown that, in their model, unless the capacity of the stalls is a binding constraint, any reduction in feed per cow is of second-order importance and solely the result of the indivisibility of the cow input. Moreover, the connections between farm-level decisions and the short-run, industry equilibria implied by their model are examined.

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