ESTIMATING SUPPLY DESPITE A QUOTA: BRAZIL'S SUPPLY OF SUGAR

In this paper a model is developed from which the supply curve, of a stochastically produced good, can be estimated when the observations are constrained by a quota. It is shown that, for any (price, quantity) combination observed in the presence of a quota, we can simulate a corresponding (price, quantity) combination which could have been observed in the absence of a quota. This procedure is then employed to construct "free-market" observations on Brazil's supply of sugar, with which the supply curve is then estimated, and production in the absence of sugar quotas inferred.