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Readdressing the Fertilizer Problem

Listed author(s):
  • Paulson, Nicholas D.
  • Babcock, Bruce A.

The production literature has shown that inputs such as fertilizer can be defined as risk-increasing. However, farmers also consistently overapply nitrogen. A model of optimal input use under uncertainty is used to address this paradox. Using experimental data, a stochastic production relationship between yield and soil nitrate is estimated. Numerical results show that input uncertainty may cause farmers to overapply nitrogen. Survey data suggest that farmers are risk averse, but prefer small chances of high yields compared to small chances of crop failures when expected yields are equivalent. Furthermore, yield risk and yield variability are not equivalent.

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File URL: http://purl.umn.edu/97853
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Article provided by Western Agricultural Economics Association in its journal Journal of Agricultural and Resource Economics.

Volume (Year): 35 (2010)
Issue (Month): 3 (December)
Pages:

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Handle: RePEc:ags:jlaare:97853
Contact details of provider: Web page: http://waeaonline.org/

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  1. Ishii, Yasunori, 1977. "On the Theory of the Competitive Firm under Price Uncertainty: Note," American Economic Review, American Economic Association, vol. 67(4), pages 768-769, September.
  2. Terrance M. Hurley & Paul D. Mitchell & Marlin E. Rice, 2004. "Risk and the Value of Bt Corn," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(2), pages 345-358.
  3. Babcock, Bruce A. & Choi, E. Kwan & Feinerman, Eli, 1993. "Risk And Probability Premiums For Cara Utility Functions," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 18(01), July.
  4. Babcock, Bruce A. & Blackmer, Alfred M., 1992. "The Value Of Reducing Temporal Input Nonuniformities," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 17(02), December.
  5. Babcock, Bruce A., 1992. "Effects of Uncertainty on Optimal Nitrogen Applications (The)," Staff General Research Papers Archive 10588, Iowa State University, Department of Economics.
  6. Bharat Ramaswami, 1992. "Production Risk and Optimal Input Decisions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 74(4), pages 860-869.
  7. Sandmo, Agnar, 1971. "On the Theory of the Competitive Firm under Price Uncertainty," American Economic Review, American Economic Association, vol. 61(1), pages 65-73, March.
  8. Richard E. Just & Rulon D. Pope, 1979. "Production Function Estimation and Related Risk Considerations," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 61(2), pages 276-284.
  9. Quirino Paris, 1992. "The von Liebig Hypothesis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 74(4), pages 1019-1028.
  10. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-291, March.
  11. Bruce A. Babcock, 1992. "The Effects of Uncertainty on Optimal Nitrogen Applications," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 14(2), pages 271-280.
  12. Edgar A. Lanzer & Quirino Paris, 1981. "A New Analytical Framework for the Fertilization Problem," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 63(1), pages 93-103.
  13. Babcock, Bruce A. & Blackmer, A. M., 1992. "Value of Reducing Temporal Input Nonuniformities (The)," Staff General Research Papers Archive 10587, Iowa State University, Department of Economics.
  14. Hartman, Richard, 1976. "Factor Demand with Output Price Uncertainty," American Economic Review, American Economic Association, vol. 66(4), pages 675-681, September.
  15. Peter Berck & Gloria Helfand, 1990. "Reconciling the von Liebig and Differentiable Crop Production Functions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(4), pages 985-996.
  16. David A. Hennessy, 2009. "Crop Yield Skewness Under Law of the Minimum Technology," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(1), pages 197-208.
  17. S. SriRamaratnam & David A. Bessler & M. Edward Rister & John E. Matocha & James Novak, 1987. "Fertilization under Uncertainty: An Analysis Based on Producer Yield Expectations," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 69(2), pages 349-357.
  18. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
  19. Hurley, Terrance M. & Babcock, Bruce A., 2003. "Valuing Pest Control: How Much is Due to Risk Aversion?," Staff General Research Papers Archive 10385, Iowa State University, Department of Economics.
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