| Abstract | Why does a cycle of fluctuation in the pig price recur? Mostly scholars think that the “cobweb theorem” can explain the phenomenon of pig cycle. However, as if Coase, as a representative of economist, criticizes that the simple model could not be applied to the pig cycle. Firstly, the behavior assumption of the farmers isn’t consistent with reality or isn’t reasonable in a complete information world; Secondly, the production of pig includes the stage of adjusting the capacity except for the stage of breeding and fatting up. Consider the lag of the pig production and the constraint that market information is incomplete, 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 market situation changes, the inaccurate price expectation must lead to the cycle in the price fluctuation of pig. What’s more, the length of cycle depends on the particular forms of price expectation. Furthermore, this paper show that the government can well smooth out (or reduce) the fluctuation of the cycle in the price of pig which the market failure lead to, if it choose a group of timely and reasonable policies but not single intervention policy. |