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Simultaneous Input Demands And Land Allocation In Agricultural Production Under Certainty

Author

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  • Babcock, Bruce A.
  • Chalfant, James A.
  • Collender, Robert N.

Abstract

Multicrop farmers must choose variable input levels and land quantity for each crop. Economic researchers to date have analyzed these two decisions separately, either finding the best land use, given crop technologies, or solving for optimal input levels, ignoring the allocation of land. We show that both these approaches lead to suboptimal decision rules under risk aversion. An empirical example demonstrates that a risk-averse farmer who makes these decisions sequentially-first choosing input levels then allocating land-rather than simultaneously, may significantly understates the value of farming.

Suggested Citation

  • Babcock, Bruce A. & Chalfant, James A. & Collender, Robert N., 1987. "Simultaneous Input Demands And Land Allocation In Agricultural Production Under Certainty," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 12(2), pages 1-9, December.
    • Handle: RePEc:ags:wjagec:32226
    DOI: 10.22004/ag.econ.32226
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    References listed on IDEAS

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    1. Antle, John M, 1983. "Testing the Stochastic Structure of Production: A Flexible Moment-based Approach," Journal of Business & Economic Statistics, American Statistical Association, vol. 1(3), pages 192-201, July.
    2. Robert N. Collender & David Zilberman, 1985. "Land Allocation under Uncertainty for Alternative Specifications of Return Distributions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 67(4), pages 779-786.
    3. Hans P. Binswanger, 1980. "Attitudes Toward Risk: Experimental Measurement in Rural India," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 62(3), pages 395-407.
    4. Robert Neil Collender & James A. Chalfant, 1986. "An Alternative Approach to Decisions under Uncertainty Using the Empirical Moment-Generating Function," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(3), pages 727-731.
    5. Pope, Rulon D. & Kramer, Randall A., 1978. "Production Uncertainty and Factor Demands for the Competitive Firm," Working Papers 225637, University of California, Davis, Department of Agricultural and Resource Economics.
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    Cited by:

    1. Alfons Oude Lansink, 1999. "Area Allocation Under Price Uncertainty on Dutch Arable Farms," Journal of Agricultural Economics, Wiley Blackwell, vol. 50(1), pages 93-105, January.
    2. 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), pages 1-8, July.
    3. Metcalfe, Todd & Bosch, Darrell J. & Pease, James W. & Alley, Mark M. & Phillips, Steve B., 2007. "Yield Reserve Program Costs in the Virginia Coastal Plain," Agricultural and Resource Economics Review, Cambridge University Press, vol. 36(2), pages 197-212, October.
    4. Alain Carpentier & Robert D. Weaver, 1995. "The contribution of pesticides to agricultural production : a reconsideration [Le rôle des pesticides dans la production agricole : nouvelle approche]," Post-Print hal-02850939, HAL.
    5. Bruce A. Babcock & Jason F. Shogren, 1995. "The cost of agricultural production risk," Agricultural Economics, International Association of Agricultural Economists, vol. 12(2), pages 141-150, April.
    6. repec:isu:genstf:1999010108000013154 is not listed on IDEAS
    7. Buchholz, Matthias & Musshoff, Oliver, 2014. "The role of weather derivatives and portfolio effects in agricultural water management," Agricultural Water Management, Elsevier, vol. 146(C), pages 34-44.
    8. Alexandre Gohin & Herve Guyomard & Fabrice Levert & . Ministère de L'Aménagement Du Territoire Et de L'Environnement, Direction Générale de L'Administration Et Du Développement, Paris (fra) & Francois, 2000. "Economic impacts of reducing agricultural use of mineral fertilizer in France : a general equilibrium analysis [Impacts économiques d'une réduction des utilisations agricoles des engrais minéraux et des produits phytosanitaires en France : analyse," Post-Print hal-02840460, HAL.
    9. Loehman, Edna T. & Nelson, Carl H., 1992. "Optimal Risk Management, Risk Aversion, And Production Function Properties," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 17(2), pages 1-13, December.
    10. Nolan, Elizabeth & Santos, Paulo, 2012. "Insurance premiums and GM traits," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 125942, International Association of Agricultural Economists.
    11. Alain Carpentier & . European Association of Environmental And Resource Economists, 1994. "Some issues on pesticide ban : the example of the French crop sector," Post-Print hal-01947506, HAL.
    12. Andreas Tsakiridis & Kevin Hanrahan & James Breen & Cathal O’Donoghue & Michael Wallace, 2025. "Modelling pasture-based beef production costs using panel data from farms with different soil quality," Review of Agricultural, Food and Environmental Studies, Springer, vol. 106(1), pages 1-71, May.
    13. Meilke, K.D. & Weersink, A., 1991. "An Analysis of the Effects of Government Payments to Grain and Oilseeds Producers on Cropping Decisions," Papers 9-91, Gouvernement du Canada - Agriculture Canada.
    14. Love, H. Alan & Buccola, Steven T., 1989. "Risk Aversion, Input Use, And Heteroskedastic Supply," 1989 Quantifying Long Run Agricultural Risks and Evaluating Farmer Responses to Risk Meeting, April 9-12, 1989, Sanibel Island, Florida 271525, Regional Research Projects > S-232: Quantifying Long Run Agricultural Risks and Evaluating Farmer Responses to Risk.
    15. Sharofiddinov Husniddin & Moinul Islam & Yutaka Kobayashi & Koji Kotani, 2025. "Input-price uncertainty and land allocation decisions by farmers," Working Papers SDES-2025-12, Kochi University of Technology, School of Economics and Management, revised Dec 2025.
    16. Asci, Serhat & Borisova, Tatiana & VanSickle, John J. & Zotarelli, Lincoln, 2012. "Risk and Nitrogen Application Decisions in Florida Potato Production," 2012 Annual Meeting, February 4-7, 2012, Birmingham, Alabama 119797, Southern Agricultural Economics Association.
    17. Alain Carpentier & Robert D. Weaver, 1996. "Assessment of producers' attitude toward risk and information using panel data : the example of pesticide use in the French crop sector," Post-Print hal-01931607, HAL.
    18. Alain Carpentier & Robert D. Weaver & . American Agricultural Economics Association, 1995. "Heterogeneity bias, panel data and the productivity of pesticides," Post-Print hal-02299673, HAL.

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