Benefits from Price Stabilization to Producers and Processors: The Australian Buffer‐Stock Scheme for Wool

In much of the stabilization literature emphasis has been placed on the impact of stabilization schemes on producers. However, such schemes may also have significant implications for processors and consumers. In this paper the Newbery and Stiglitz approach is extended to demonstrate the effects of both demand and supply instability using the Australian buffer‐stock scheme for wool as a case study. It is shown that both producers and processors are likely to gain from price stabilization.