Risk programming and sparse data: how to get more reliable results
AbstractBecause relevant historical data for farms are inevitably sparse, most risk programming studies rely on few observations of uncertain crop and livestock returns. We show the instability of model solutions with few observations and discuss how to use available information to derive an appropriate multivariate distribution function that can be sampled for a more complete representation of the possible risks in risk-based models. For the particular example of a Norwegian mixed livestock and crop farm, the solution is shown to be unstable with few states of nature producing a risky solution that may be appreciably sub-optimal. However, the risk of picking a sub-optimal plan declines with increases in number of states of nature generated by Latin hypercube sampling.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Agricultural Systems.
Volume (Year): 101 (2009)
Issue (Month): 1-2 (June)
Contact details of provider:
Web page: http://www.elsevier.com/locate/agsy
Risk programming States of nature Sparse data Kernel smoothing Latin hypercube sampling;
Other versions of this item:
- Hardaker, J. Brian & Lien, Gudbrand D. & Van Asseldonk, Marcel A.P.M. & Richardson, James W. & Hegrenes, Agnar, 2008. "Risk programming and sparse data: how to get more reliable results," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44051, European Association of Agricultural Economists.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- David J. Pannell, 2006. "Flat Earth Economics: The Far-reaching Consequences of Flat Payoff Functions in Economic Decision Making," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 28(4), pages 553-566.
- Hardaker, J. Brian & Patten, Louise H. & Pannell, David J., 1988.
"Utility-Efficient Programming For Whole-Farm Planning,"
Australian Journal of Agricultural Economics,
Australian Agricultural and Resource Economics Society, vol. 32(02-03).
- J. Brian Hardaker & Louise H. Patten & David J. Pannell, 1988. "Utility‐Efficient Programming For Whole‐Farm Planning," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 32(2-3), pages 88-97, 08-12.
- G Lien & JB Hardaker, 2001. "Whole-farm planning under uncertainty: impacts of subsidy scheme and utility function on portfolio choice in Norwegian agriculture," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 28(1), pages 17-36, March.
- Lien, Gudbrand D. & Hardaker, J. Brian & Richardson, James W., 2006. "Simulating Multivariate Distributions with Sparse Data: A Kernal Density Smoothing Procedure," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25449, International Association of Agricultural Economists.
- Richardson, James W. & Klose, Steven L. & Gray, Allan W., 2000. "An Applied Procedure For Estimating And Simulating Multivariate Empirical (Mve) Probability Distributions In Farm-Level Risk Assessment And Policy Analysis," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 32(02), August.
- Nanseki, Teruaki & Morooka, Yoshinori, 1991. "Risk preference and optimal crop combinations in upland Java, Indonesia: An application of stochastic programming," Agricultural Economics, Blackwell, vol. 5(1), pages 39-58, January.
- Torkamani, Javad, 2005. "Using a whole-farm modelling approach to assess prospective technologies under uncertainty," Agricultural Systems, Elsevier, vol. 85(2), pages 138-154, August.
- Flaten, O. & Lien, G., 2007. "Stochastic utility-efficient programming of organic dairy farms," European Journal of Operational Research, Elsevier, vol. 181(3), pages 1574-1583, September.
- Lence, Sergio H. & Hayes, Dermot J., 1995.
"Land Allocation In The Presence Of Estimation Risk,"
Journal of Agricultural and Resource Economics,
Western Agricultural Economics Association, vol. 20(01), July.
- Lence, Sergio H. & Hayes, Dermot J., 1995. "Land Allocation in the Presence of Estimation Risk," Staff General Research Papers 995, Iowa State University, Department of Economics.
- Dorward, Andrew, 1999. "A Risk Programming Approach for Analysing Contractual Choice in the Presence of Transaction Costs," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 26(4), pages 479-92, December.
- Adonis Yatchew, 1998. "Nonparametric Regression Techniques in Economics," Journal of Economic Literature, American Economic Association, vol. 36(2), pages 669-721, June.
- Nanseki, Teruaki & Morooka, Yoshinori, 1991. "Risk preference and optimal crop combinations in upland java, Indonesia: an application of stochastic programming," Agricultural Economics: The Journal of the International Association of Agricultural Economists, International Association of Agricultural Economists, vol. 5(1), January.
- Pannell, David J. & Nordblom, Thomas L., 1998. "Impacts of risk aversion on whole-farm management in Syria," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 42(3), September.
- Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, 03.
- Acs, Szvetlana & Berentsen, Paul & Huirne, Ruud & van Asseldonk, Marcel, 2009. "Effect of yield and price risk on conversion from conventional to organic farming," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 53(3), September.
- Kandulu, John, 2011. "Assessing the potential for beneficial diversification in rain-fed agricultural enterprises," 2011 Conference (55th), February 8-11, 2011, Melbourne, Australia 100568, Australian Agricultural and Resource Economics Society.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.