| Abstract | Why does a cycle of fluctuation in the pig price recur? The view which was known as the “cobweb theorem” and had been commonly held by agricultural economists thinks that this result may be due to the assumption that present prices will continue unchanged in the future. However, as if Coase, as a representative of economist, criticizes that the “cobweb theorem” could not be applied to the pig cycle. Firstly, the assumption of prices expectation isn’t consistent with reality; Secondly, the “cobweb theorem” can’t very well explain the length of the cycle. Consider the lag of the pig production and the constraint that market information is imperfect, the pig farmers could have to accept the price expectation that is a weight average of previous and present pig price. This paper show when the farmers can only make a production decision according to previous and present market price, the cycle in the price fluctuation of pig must recur. What’s more, the length of cycle depends on the particular forms of price expectation. Furthermore, consider the advantage of government’s information and capability, a group of timely and reasonable policies often may efficiently smooth out the fluctuation of the cycle in the price of pig. |