duction in the amount of MDP marketed. The amount
of the reduction can be estimated using the elasticities
reported in Table 3. Holding relative prices and the
adoption rate constant, a 1 percent decrease in the
availability of potentially usable poultry inputs is as-
sociated with a 0.25 percent decrease in production of
MDP.
A second category of possible new regulations af-
fecting compliance costs may have an even more im-
portant effect on the supply of MDP. Examples include
regulations governing the type, number, and fre-
quency of laboratory tests required to demonstrate
compliance with ingredient standards, or regulations
governing quality-control programs, and record-keep-
ing, reporting, and labeling requirements. These types
of regulations may be viewed as decreasing the ratio of
PMDP to PSUB. To the extent that the additional com-
pliance costs are fixed, their impact on larger firms is
likely to be slight, but smaller firms may be signifi-
cantly affected. While more specific analysis must
await concrete regulatory proposals, the elasticities in
Table 3 suggest that a 1 percent decline in the relative
price of MDP, holding constant the availability of in-
puts and the adoption rate, is directly associated with
a 0.2 percent decline in MDP production. Regulations
of this type also affect the rate of adoption, which in
turn affects MDP production. Using the relative price
elasticity in the second equation of the supply-re-
sponse model, a 1 percent decrease in the relative price
of MDP is also associated with a 0.09 percent decline
in the adoption rate. Returning to the first equation in
the model, a 0.09 percent decline in the adoption rate
is in turn associated with a 0.135 percent (0.09 X 1.5)
decline in MDP production, ceterus paribus. The
combined direct and indirect effects of a 1 percent de-
crease in the relative price of MDP outweigh the effect
of a 1 percent decrease in the availability of potentially
usable poultry inputs.
SUMMARY AND CONCLUSIONS
The preceding analysis has demonstrated the im-
portance of the relative price of MDP, the availability
of poultry inputs, and the rate of adoption of the me-
chanical deboning technology in determining poultry
processors’ MDP supply response. The supply-re-
sponse model developed should be useful in analyzing
the consequences of specific MDP regulatory propos-
als affecting these supply response variables.
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