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Search Theory Risk Preference and Farmland Preservation

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  • Tavernier, Edmund M.
  • Li, Farong
  • Temel, Tugrul T.

Abstract

This paper uses search theory to examine the role that risk preference (RP) plays in farmland preservation. Assuming that the distribution of the offer price is fixed, the analysis indicates that risk-averse agents have lower reservation prices than risk-neutral agents, and that agricultural land held by the former exits farming at a faster rate. The results also show that farmland preservation policies which increase reservation prices have a greater capitalization effect if agents are risk-loving, and that such policies, while effectively protecting the interest of land speculators, may be less effective in serving the needs of farming and farm-held open space.

Suggested Citation

  • Tavernier, Edmund M. & Li, Farong & Temel, Tugrul T., 1996. "Search Theory Risk Preference and Farmland Preservation," Agricultural and Resource Economics Review, Cambridge University Press, vol. 25(1), pages 38-45, April.
    • Handle: RePEc:cup:agrerw:v:25:y:1996:i:01:p:38-45_00
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    Cited by:

    1. Gregory, S. Amacher & Christine Conway, M. & Sullivan, Jay & Gregory, S. Amacher, 2003. "Econometric analyses of nonindustrial forest landowners: Is there anything left to study?," Journal of Forest Economics, Elsevier, vol. 9(2), pages 137-164.
    2. Temel, Tugrul, 2011. "The formation of offer prices in farmland markets: A hedonic price approach," MPRA Paper 31921, University Library of Munich, Germany.
    3. Batabyal, Amitrajeet A., 2004. "Endogenizing The Reservation Value In Models Of Land Development Over Time And Under Uncertainty," Economics Research Institute, ERI Series 28340, Utah State University, Economics Department.
    4. Colyer, Dale, 1998. "Farmland Preservation Programs," Conference Papers 19102, West Virginia University, Department of Agricultural Resource Economics.

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