Complex Choices: Producers Risk Management Strategies

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Complex Choices: Producers Risk Management Strategies

Author Info

Pennings, Joost M.E.
Isengildina, Olga
Irwin, Scott H.
Good, Darrel L.
Garcia, Philip
Frank, Julieta M.
Kuiper, W. Erno

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Abstract

Producers have a wide variety of risk management instruments available. How do producers make a choice of risk management instruments? Using the recently developed choice bracketing framework, we examine what risk management strategies producers use and identify the factors that drive their risk management decisions. Our results identify that producers use a wide variety of combinations of risk management instruments and that they bracket their choices into sets of alternative risk management instruments. Using multinomial logit models to estimate the choice process provides information about the factors that influence producers' decision making. The results show that broad bracketing producers use different risk management instruments than narrow bracketers. Policy makers and financial institutions can improve the performance of their programs and products when they are able to identify the bracketing level of segments of producers.

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Publisher Info
Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2005 Annual meeting, July 24-27, Providence, RI with number 19550.

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Date of creation: 2005
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Handle: RePEc:ags:aaea05:19550

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References listed on IDEAS
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.:

Karen E. Dynan, 2000. "Habit Formation in Consumer Preferences: Evidence from Panel Data," American Economic Review, American Economic Association, vol. 90(3), pages 391-406, June. [Downloadable!] (restricted)
Pennings, Joost M.E. & Isengildina, Olga & Irwin, Scott H. & Good, Darrel L., 2004. "The Impact of Market Advisory Service Recommendations on Producers' Marketing Decisions," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 29(02), August. [Downloadable!]
Isengildina, Olga & Pennings, Joost M.E. & Irwin, Scott H. & Good, Darrel L., 2004. "Crop Farmersâ Use of Market Advisory Services," AgMAS Project Research Reports 37489, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics. [Downloadable!]
McFadden, Daniel, 1999. "Rationality for Economists?," Journal of Risk and Uncertainty, Springer, vol. 19(1-3), pages 73-105, December. [Downloadable!] (restricted)
Other versions:
- Daniel McFadden, 1998. "Rationality for Economists?," Working Papers 98-09-086, Santa Fe Institute.
Pennings, Joost M. E. & Garcia, Philip, 2004. "Hedging behavior in small and medium-sized enterprises: The role of unobserved heterogeneity," Journal of Banking & Finance, Elsevier, vol. 28(5), pages 951-978, May. [Downloadable!] (restricted)
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Other versions:
- Earl, P.E., 1990. "Economics And Psychology: A Survey," Papers 1990-04, Tasmania - Department of Economics.
Ani L. Katchova & Mario J. Miranda, 2004. "Two-Step Econometric Estimation of Farm Characteristics Affecting Marketing Contract Decisions," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 86(1), pages 88-102, 02. [Downloadable!] (restricted)
Coble, Keith H. & Heifner, Richard G. & Zuniga, Manuel, 2000. "Implications Of Crop Yield And Revenue Insurance For Producer Hedging," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 25(02), December. [Downloadable!]
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MacNicol, R. & Ortmann, G.F. & Ferrer, S.R.D., 2008. "Management decisions on commercial sugarcane farms in KwaZulu-Natal: a focus on choice bracketing behaviour for risk management," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 47(1), March. [Downloadable!]

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