Agricultural Economics and Development

Agricultural Economics and Development

Application of the Social Welfare Approach to Optimal Potato Pricing in Tehran Municipality Fruit and Vegetable Markets

Document Type : Original Article

Authors
1 Researcher at the Tehran Urban Research and Planning Center and PhD Graduate in Agricultural Economics, Tarbiat Modares University, Tehran, Iran.
2 Associate Professor of Agricultural Economics, Tarbiat Modares University, Tehran, Iran
3 PhD Graduate in Agricultural Economics Engineering – Agricultural Products Marketing
10.30490/aead.2026.367612.1727
Abstract
The price of a good or service is one of the most important economics variables, playing a decisive role in the decision-making of consumers and producers. Accordingly, governments and public institutions intervene in the pricing of certain goods and services in order to regulate markets, prevent excessive price fluctuations, and enhance consumer welfare. Given that the Management of Fruit and Vegetables Organization, as a public institution, intervenes in the pricing process to ensure citizens’ access to healthy and affordable products, examining the welfare implications of such interventions is of considerable importance.In this study, focusing on potato pricing in Management of Fruit and Vegetables Organization, an optimization framework based on a social welfare function is employed to examine optimal selling prices under different inventory levels and to assess the resulting social welfare effects of the intervention by the Management of Fruit and Vegetables Organization.The results indicate that increasing the weight assigned to consumer surplus in the social welfare function leads to lower optimal selling prices, reflecting the policymaker’s preference for enhancing consumer access to essential food commodities. However, the findings also reveal that once the weight on consumer surplus exceeds a certain threshold, further price reductions do not generate a significant increase in social welfare, and the pricing system converges to a “welfare-based floor price.”it is suggested that the marketplace organization use social welfare–based pricing as an active market-regulation tool. This would allow marketplaces to maintain their price advantage relative to the city while achieving higher welfare efficiency
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