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Investment In Site Specific Crop Management Under Uncertainty

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  • Isik, Murat
  • Khanna, Madhu
  • Winter-Nelson, Alex

Abstract

This paper examines the impact of price uncertainty on farmers' adoption decision in site specific crop management using an option value model. It shows that price uncertainty could lead farmers to delay the investment 3 to 25 years as opposed to the net present value rule. Immediate investment is only worthwhile on high soil fertility and soil quality fields with high variability.

Suggested Citation

  • Isik, Murat & Khanna, Madhu & Winter-Nelson, Alex, 1999. "Investment In Site Specific Crop Management Under Uncertainty," 1999 Annual meeting, August 8-11, Nashville, TN 21684, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea99:21684
    DOI: 10.22004/ag.econ.21684
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    File URL: https://ageconsearch.umn.edu/record/21684/files/sp99is01.pdf
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    References listed on IDEAS

    as
    1. Robert McDonald & Daniel Siegel, 1986. "The Value of Waiting to Invest," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 101(4), pages 707-727.
    2. Babcock, Bruce A. & Pautsch, Gregory R., 1998. "Moving From Uniform To Variable Fertilizer Rates On Iowa Corn: Effects On Rates And Returns," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 23(2), pages 1-16, December.
    3. Khanna, Madhu & Isik, Murat & Winter-Nelson, Alex, 2000. "Investment in site-specific crop management under uncertainty: implications for nitrogen pollution control and environmental policy," Agricultural Economics, Blackwell, vol. 24(1), pages 9-21, December.
    4. Gary Kachanoski, 1999. "Economic Feasibility of Variable-Rate Technology for Nitrogen on Corn," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(4), pages 914-927.
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    Cited by:

    1. Isik, Murat & Khanna, Madhu & Winter-Nelson, Alex, 2000. "Sequential Investment In Site-Specific Crop Management Under Output Price Uncertainty: Implications For Nitrogen Pollution Control," 2000 Annual meeting, July 30-August 2, Tampa, FL 21875, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. Li Yu & Peter F. Orazem, 2014. "O-Ring production on U.S. hog farms: joint choices of farm size, technology, and compensation," Agricultural Economics, International Association of Agricultural Economists, vol. 45(4), pages 431-442, July.

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