In the cobweb model of agricultural markets, what do farmers use to decide the next period’s output?

In the cobweb model of agricultural markets, farmers use the previous period’s price to decide the next period’s output.

The model describes markets in which production decisions must be made before producers observe the price that will prevail when the crop is ready for sale. Farmers see an earlier price and use it as a signal for planting or production. Because all producers respond with a delay, the next period’s quantity can create a price that differs from the signal they received.

This feedback can generate oscillations around equilibrium. Depending on the relative slopes of supply and demand, the cycles may converge toward equilibrium, remain constant in size, or diverge. The model is called “cobweb” because its graph can form a web-like path between alternating prices and quantities.

The model is a simplified framework rather than a complete description of farming. Expectations, storage, contracts, government programs, weather, and international trade can all weaken or alter the delayed-response mechanism.