A Real Options Analysis of Coffee Planting in Vietnam
AbstractVietnam grew from an insignificant to the world’s second largest coffee producer during the 1990s. To understand this growth, this paper examines Vietnamese coffee growers’ investment decisions using real options theory. The study finds that producers, with variable costs of 19 cents/lb and total cost of 29.3 cents/lb, would enter coffee production at a coffee price of 47 cents/lb and exit at a coffee price of 14 cents/lb. Most Vietnamese growers appear to be sufficiently efficient to continue producing coffee even at relatively depressed price levels.
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Bibliographic InfoPaper provided by Cornell University, Department of Applied Economics and Management in its series Working Papers with number 127152.
Date of creation: Oct 2004
Date of revision:
Vietnam; coffee; real options; price uncertainty; irreversibility; investment; abandonment.; Crop Production/Industries;
Other versions of this item:
- Quoc V. Luong & Loren W. Tauer, 2006. "A real options analysis of coffee planting in Vietnam," Agricultural Economics, International Association of Agricultural Economists, vol. 35(1), pages 49-57, 07.
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