Case Number: 5-307-507, Year Published: 2007
HBS Number: KEL348
Subsidies, market distortion, social welfare, deadweight loss, industry supply curve
The case describes the competitive advantages that U.S. farmers enjoy in the global cotton industry and the subsidies they receive from the U.S. federal government. Arguments for and against the subsidies are presented in the context of global competition. The case includes the data needed to estimate a supply curve for 2004 cotton production and predict the average 2004 cotton price using total cotton consumption for 2004. Students can also estimate the result of eliminating the U.S. cotton subsidies on the average 2004 cotton price. The learning objective of the case is for students to have the opportunity to learn about the history and structure of U.S. cotton subsidies as well as their impact on global cotton prices. Students also are able to practice building and interpreting an industry supply curve.
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