How Much Can We Learn About Producers' Utility Functions from Their Production Data?
AbstractA thought experiment is designed to investigate whether the structure of risk aversion (i.e., the changes in absolute or relative risk aversion associated with changes in wealth) can be estimated with reasonable precision from agricultural production data. Findings strongly suggest that typical production data are unlikely to allow identification of the structure of risk aversion. A flexible utility parameterization is found to slightly worsen technology parameter estimates. Results also indicate that even under a restricted utility specification, utility parameter estimates are biased. Further, their quality is much worse when shocks are not large or samples are small.
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Bibliographic InfoPaper provided by Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition in its series Proceedings:2008 Agricultural and Rural Finance Markets in Transition, September 25-26, 2008, Kansas City, Missouri with number 119534.
Date of creation: 2008
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expected utility; risk preferences; production analysis; risk attitudes; Production Economics; Risk and Uncertainty; C13; D24; D81; Q12;
Find related papers by JEL classification:
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
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