A welfare Analysis of the Government Interventions in the Wheat Market and Its Influence on the Barley Market in Iran, using a Game Theoretic approach

Iran achieved its self-sufficiency goal in wheat production a few years ago. Some opponents argue that the increased wheat production has happened at the expense of decreasing other grains specially barley. Considering the dependency of wheat and barley markets on each other، the study estimates policy preference functions for each market، separately. Using weights according to the political indicies، game theory approach was utilized to investigate welfare impacts of such attempt. Results not only justified the arguments but indicated that welfare has been transmitted from wheat producers to consumers and the government as well. Despite having producer and consumer surpluses in wheat market، the high expenses of government lead welfare losses، while the welfare surplus in the barley market was positive. Finally، overall Nash equilibrium as the best strategy occurs by 15% decrease in wheat-cultivated area and 20% decrease in barley production cost. These results undoubtedly imply that the optimal social welfare is associated with mitigating government role in the wheat market.