INTERACTION EFFECTS OF PROMOTION, RESEARCH, AND PRICE SUPPORT PROGRAMS FOR U.S. COTTON

found in Piggott, Piggott, and Wright (1995); Wohlgenant (1993); and Wohlgenant and Clary (1993),
among others. The retail market consists primarily of the apparel market and the home furnishings
market. The textile market consists of intermediate textile producers and consumers in the U.S. and is the
major demander of raw cotton.⁸ The structural market model for domestic cotton is defined as follows:⁹

Q_r^d_d = Drd(Prd, Prm, Ag, Ab, Af, Zr)

Retail demand for domestic cotton products                          (1)

Q_r^s_d = S_rd(P_rd, P_td, P_tm, W_r)

Retail supply of domestic cotton products                            (2)

Q_t^d_d = Dtd(Prd, Ptd, Ptm, Wr)

Derived demand for intermediate cotton textiles                      (3)

Q_t^s_d = Std(Ptd, Ptm, Pcd, Pcf, Rt, Wt)

Supply of intermediate cotton textiles                                  (4)

Q_f^d_d = Dfd(Ptd, Ptm, Pcd, Pcf, Rt, Wt)

U.S. demand for domestic raw cotton fiber                          (5)

Q_f^s_d = Sfd(Pcd, Ra, Wf)

U.S. supply of raw cotton fiber                                       (6)

Q_f^d_x = Dfx(Pcd, Pcf, Zx, Wm, Tf)

Export demand for raw U.S. cotton fiber                            (7)

P_tm = MC_tm(P_cd, P_cf, W_m)

Price of imported textile products                                      (8)

Ptd = MCtd(Pcd, Pcf, Wt)

Price of domestic textile products                                      (9)

Q^d = Q^s
rd rd

Retail market clearance                                             (10)

Q^d = Q^s

^Qtd ^=Qtd

Textile market clearance                                           (11)

⁸The term “textiles” as used in this model includes all intermediate products that will be used as inputs into making
apparel, home furnishings, or other retail products.

⁹This model assumes a fixed-proportions marketing technology. In other words, a unit of fiber input is combined with a
fixed amount of “marketing” inputs to generate a unit of output. We believe that this is a reasonable assumption for
cotton product production, at least for the range of production levels being examined. However, it does have
somewhat different implications for producers compared with variable proportions technology. Kinnucan, Xiao, and
Yu (2000) show that if marketing technology is variable proportions, then research that reduces marketing costs can
potentially result in a negative effect on producers.

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