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Search Theory Risk Preference And Farmland Preservation

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  • Tavernier, Edmund M.
  • Li, Farong
  • Temel, Tugrul T.

Abstract

This paper uses search theory to examine the role that risk preference (RP) plays in farmland preservation. Assuming that the distribution of the offer price is fixed, the analysis indicates that risk-averse agents have lower reservation prices than risk-neutral agents, and that agricultural land held by the former exits farming at a faster rate. The results also show that farmland preservation policies which increase reservation prices have a greater capitalization effect if agents are risk-loving, and that such policies, while effectively protecting the interest of land speculators, may be less effective in serving the needs of farming and farm-held open space.

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File URL: http://purl.umn.edu/31653
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Bibliographic Info

Article provided by Northeastern Agricultural and Resource Economics Association in its journal Agricultural and Resource Economics Review.

Volume (Year): 25 (1996)
Issue (Month): 1 (April)
Pages:

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Handle: RePEc:ags:arerjl:31653

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Web page: http://www.narea.org/
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Keywords: Risk and Uncertainty;

References

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  1. William A. Fischel, 1990. "Introduction: Four Maxims for Research on Land-Use Controls," Land Economics, University of Wisconsin Press, vol. 66(3), pages 229-236.
  2. Jeffrey Kline & Dennis Wichelns, 1994. "Using Referendum Data to Characterize Public Support for Purchasing Development Rights to Farmland," Land Economics, University of Wisconsin Press, vol. 70(2), pages 223-233.
  3. John E. Anderson & Howard C. Bunch, 1989. "Agricultural Property Tax Relief: Tax Credits, Tax Rates, and Land Values," Land Economics, University of Wisconsin Press, vol. 65(1), pages 13-22.
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Cited by:
  1. Amit Batabyal & Basudeb Biswas, 2005. "Endogenizing the Reservation Value in Models of Land Development Over Time and Under Uncertainty," ERSA conference papers ersa05p163, European Regional Science Association.
  2. Temel, Tugrul, 2011. "The formation of offer prices in farmland markets: A hedonic price approach," MPRA Paper 31921, University Library of Munich, Germany.
  3. Colyer, Dale, 1998. "Farmland Preservation Programs," Conference Papers 19102, West Virginia University, Department of Agricultural Resource Economics.

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