IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

The impact of CAP policy in farmer's behavior – A modeling approach using the Cumulative Prospect Theory

  • Coelho, Luís Alberto Godinho
  • Pires, Cesaltina Maria Pacheco
  • Dionísio, Andreia Teixeira
  • Serrão, Amílcar Joaquim da Conceição

This paper proposes a modeling approach to evaluate the impact of economic policies on the decision maker's behavior. This modeling approach incorporates the agent's preferences, estimated through utility elicitation methods, into the objective function of a discrete sequential stochastic programming model that describes the uncertainties and the constraints faced by the decision maker. Our approach was applied to nine farmers of Portugal. The elicitation of the farmers’ preferences reveals that the Cumulative Prospect Theory is relevant to describe the farmers’ behavior under risk. Our programming model was used to evaluate the impact of the Common Agricultural Policy with partial and full decoupling of subsidies.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.sciencedirect.com/science/article/pii/S0161893811000330
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal Journal of Policy Modeling.

Volume (Year): 34 (2012)
Issue (Month): 1 ()
Pages: 81-98

as
in new window

Handle: RePEc:eee:jpolmo:v:34:y:2012:i:1:p:81-98
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505735

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Mohammed Abdellaoui, 2000. "Parameter-Free Elicitation of Utility and Probability Weighting Functions," Management Science, INFORMS, vol. 46(11), pages 1497-1512, November.
  2. Peter Wakker & Daniel Deneffe, 1996. "Eliciting von Neumann-Morgenstern Utilities When Probabilities Are Distorted or Unknown," Management Science, INFORMS, vol. 42(8), pages 1131-1150, August.
  3. Han Bleichrodt & Jose Luis Pinto & Peter P. Wakker, 2001. "Making Descriptive Use of Prospect Theory to Improve the Prescriptive Use of Expected Utility," Management Science, INFORMS, vol. 47(11), pages 1498-1514, November.
  4. Drazen Prelec, 1998. "The Probability Weighting Function," Econometrica, Econometric Society, vol. 66(3), pages 497-528, May.
  5. Imran S. Currim & Rakesh K. Sarin, 1989. "Prospect Versus Utility," Management Science, INFORMS, vol. 35(1), pages 22-41, January.
  6. Abdellaoui, Mohammed & Bleichrodt, Han, 2007. "Eliciting Gul's theory of disappointment aversion by the tradeoff method," Journal of Economic Psychology, Elsevier, vol. 28(6), pages 631-645, December.
  7. Wakker, Peter & Tversky, Amos, 1993. " An Axiomatization of Cumulative Prospect Theory," Journal of Risk and Uncertainty, Springer, vol. 7(2), pages 147-75, October.
  8. George Wu & Richard Gonzalez, 1996. "Curvature of the Probability Weighting Function," Management Science, INFORMS, vol. 42(12), pages 1676-1690, December.
  9. Quiggin, John, 1982. "A theory of anticipated utility," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 323-343, December.
  10. Fennema, Hein & van Assen, Marcel, 1998. "Measuring the Utility of Losses by Means of the Tradeoff Method," Journal of Risk and Uncertainty, Springer, vol. 17(3), pages 277-95, December.
  11. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March.
  12. Mohammed Abdellaoui & Frank Vossmann & Martin Weber, 2005. "Choice-Based Elicitation and Decomposition of Decision Weights for Gains and Losses Under Uncertainty," Management Science, INFORMS, vol. 51(9), pages 1384-1399, September.
  13. Henry Stott, 2006. "Cumulative prospect theory's functional menagerie," Journal of Risk and Uncertainty, Springer, vol. 32(2), pages 101-130, March.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:jpolmo:v:34:y:2012:i:1:p:81-98. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.