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Simultaneous Input Demands And Land Allocation In Agricultural Production Under Certainty

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Author Info

  • Babcock, Bruce A.
  • Chalfant, James A.
  • Collender, Robert N.

Abstract

Multicrop farmers must choose variable input levels and land quantity for each crop. Economic researchers to date have analyzed these two decisions separately, either finding the best land use, given crop technologies, or solving for optimal input levels, ignoring the allocation of land. We show that both these approaches lead to suboptimal decision rules under risk aversion. An empirical example demonstrates that a risk-averse farmer who makes these decisions sequentially-first choosing input levels then allocating land-rather than simultaneously, may significantly understates the value of farming.

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File URL: http://purl.umn.edu/32226
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Bibliographic Info

Article provided by Western Agricultural Economics Association in its journal Western Journal of Agricultural Economics.

Volume (Year): 12 (1987)
Issue (Month): 02 (December)
Pages:

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Handle: RePEc:ags:wjagec:32226

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Web page: http://waeaonline.org/
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Related research

Keywords: Crop Production/Industries; Land Economics/Use;

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References

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  1. Antle, John M, 1983. "Testing the Stochastic Structure of Production: A Flexible Moment-based Approach," Journal of Business & Economic Statistics, American Statistical Association, vol. 1(3), pages 192-201, July.
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Cited by:
  1. Nolan, Elizabeth & Santos, Paulo, 2012. "Insurance premiums and GM traits," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 125942, International Association of Agricultural Economists.
  2. Babcock, Bruce A. & Shogren, Jason F., 1995. "The cost of agricultural production risk," Agricultural Economics, Blackwell, vol. 12(2), pages 141-150, August.
  3. Loehman, Edna T. & Nelson, Carl H., 1992. "Optimal Risk Management, Risk Aversion, And Production Function Properties," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 17(02), December.
  4. Metcalfe, Todd & Bosch, Darrell J. & Pease, James W. & Alley, Mark M. & Phillips, Steve B., 2007. "Yield Reserve Program Costs in the Virginia Coastal Plain," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 36(2), October.
  5. Asci, Serhat & Borisova, Tatiana & VanSickle, John J. & Zotarelli, Lincoln, 2012. "Risk and Nitrogen Application Decisions in Florida Potato Production," 2012 Annual Meeting, February 4-7, 2012, Birmingham, Alabama 119797, Southern Agricultural Economics Association.
  6. Babcock, Bruce A. & Choi, E. Kwan & Feinerman, Eli, 1993. "Risk and Probability Premiums for Cara Utility Function," Staff General Research Papers 596, Iowa State University, Department of Economics.

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