Acreage Response under Varying Risk Preferences
The assumption in standard expected utility model formulations that the coefficient of risk aversion is a constant is potentially unrealistic. This study takes the standard linear expected mean variance problem and replaces the coefficient of risk aversion with a function of risk aversion, allowing...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
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Western Agricultural Economics Association
2012-12-01
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| Series: | Journal of Agricultural and Resource Economics |
| Subjects: | |
| Online Access: | https://ageconsearch.umn.edu/record/142352 |
| Summary: | The assumption in standard expected utility model formulations that the coefficient of risk aversion is a constant is potentially unrealistic. This study takes the standard linear expected mean variance problem and replaces the coefficient of risk aversion with a function of risk aversion, allowing risk to be depicted as a constraint that farmers face. Treating output prices as stochastic, the theoretical formulation measures the impact price variability itself has on risk preferences. Acreage response elasticities are also estimated as a function of prices and price variances using U.S. county-level data for corn, soybean, and wheat producers. |
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| ISSN: | 1068-5502 2327-8285 |