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Use of strategies and decision rules by Australian wool producers to manage uncertainty

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  • Murray-Prior, Roy B.
  • Wright, Vic
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    Abstract

    Decisions by Australian wool producers were modelled with a technique combining personal construct psychology and hierarchical decision models. Both strategic and tactical approaches were evident in wool producers’ responses to the risks associated with producing and marketing their wool. Strategic responses included avoiding short to medium-term response to price changes, diversification, maintaining equity and selling wool at auction in the same sale each year. Producers identified many types of risk, with each engendering a distinctive response. Similarly the context of a decision appeared to have a major influence on the attitude to risk. Simplifying decision rules were apparent that helped producers deal with the physical, information, and processing constraints of an ambiguous decision-making environment. One implication of these results may be that prescriptive advice must recognise the importance of strategy and decision rules as a response to uncertainty and ambiguity. A second is that such advice should also take account of the influence of context on attitude to risk and ambiguity.

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    File URL: http://purl.umn.edu/120919
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    Bibliographic Info

    Article provided by Australasian Farm Business Management Network in its journal AFBM Journal.

    Volume (Year): 01 (2004)
    Issue (Month): ()
    Pages:

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    Handle: RePEc:ags:afbmau:120919

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    Web page: http://www.csu.edu.au/faculty/science/saws/afbm
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    Related research

    Keywords: hierarchical decision models; risk; uncertainty; ambiguity; strategy; wool; Farm Management;

    References

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    1. Leroy Blakeslee, 1997. "Optimal Sequential Grain Marketing Decisions under Risk Aversion and Price Uncertainty," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(4), pages 1140-1152.
    2. Mukerji, Sujoy, 1998. "Ambiguity Aversion and Incompleteness of Contractual Form," American Economic Review, American Economic Association, vol. 88(5), pages 1207-31, December.
    3. Earl, Peter E, 1990. "Economics and Psychology: A Survey," Economic Journal, Royal Economic Society, vol. 100(402), pages 718-55, September.
    4. Brent Hueth & Ethan Ligon, 1999. "Producer Price Risk and Quality Measurement," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(3), pages 512-524.
    5. Steven D. Hanson & Robert J. Myers & J. Roy Black, 1998. "The Effects of Crop Yield Insurance Designs on Farmer Participation and Welfare," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(4), pages 806-820.
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    7. Shively, Gerald E., 1997. "Consumption risk, farm characteristics, and soil conservation adoption among low-income farmers in the Philippines," Agricultural Economics, Blackwell, vol. 17(2-3), pages 165-177, December.
    8. Barry T. Coyle, 1999. "Risk Aversion and Yield Uncertainty in Duality Models of Production: A Mean-Variance Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(3), pages 553-567.
    9. Kunreuther, Howard & Meszaros, Jacqueline & Hogarth, Robin M. & Spranca, Mark, 1995. "Ambiguity and underwriter decision processes," Journal of Economic Behavior & Organization, Elsevier, vol. 26(3), pages 337-352, May.
    10. Dawn D. Thilmany, 1996. "FLC Usage Among California Growers under IRCA: An Empirical Analysis of Farm Labor Market Risk Management," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(4), pages 946-960.
    11. Alex Winter-Nelson & Koffi Amegbeto, 1998. "Option Values to Conservation and Agricultural Price Policy: Application to Terrace Construction in Kenya," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(2), pages 409-418.
    12. Pender, John L. & Kerr, John M., 1998. "Determinants of farmers' indigenous soil and water conservation investments in semi -arid India," Agricultural Economics: The Journal of the International Association of Agricultural Economists, International Association of Agricultural Economists, vol. 19(1-2), September.
    13. Murray-Prior, Roy, 1998. "Modelling farmer behaviour: a personal construct theory interpretation of hierarchical decision models," Agricultural Systems, Elsevier, vol. 57(4), pages 541-556, August.
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    Cited by:
    1. Jackson, Elizabeth & Quaddus, Mohammed & Islam, Nazrul & Stanton, John & Hoque, Zohurul, 2007. "A Multi-Disciplinary Approach For Determining Adoption Of Agricultural Price Risk Management Strategies," 81st Annual Conference, April 2-4, 2007, Reading University 7985, Agricultural Economics Society.

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