Commodity Policies and Product Differentiation: the California Milk Marketing Order and the Organic Dairy Sector

This paper evaluates the economic consequences of milk marketing orders for producers and consumers in organic and conventional milk markets. We develop a multi-market equilibrium displacement model that disaggregates the organic and conventional segments of the California milk market in order to evaluate the economic effects of alternative policies. We find that exemption of organics from marketing order regulation would make organic farmers better off at the expense of conventional farmers, but that complete deregulation would make both organic and conventional farms worse off