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The Investment Behavior of a Farm Firm Operating under Risk

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  • Ezra Sadan

Abstract

The opportunities facing the investment decision maker in a farm firm operating under risk can be summarized in some cases in terms of "efficiency frontiers," the dimensions of which are the expected present value and the variance of the farm's future net returns. This article attempts to trace and define these frontiers in terms of deductible algebraic equations in simplified single- and multiperiod cases where the farm output level is determined by a single systematic input variable—capital—and a single random factor and where the functional relationship is Cobb-Douglas. It also attempts to outline, through simulation procedures, the frontiers pertaining to a "real world" case of a growing farm cum household unit.

Suggested Citation

  • Ezra Sadan, 1970. "The Investment Behavior of a Farm Firm Operating under Risk," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 52(4), pages 494-504.
    • Handle: RePEc:oup:ajagec:v:52:y:1970:i:4:p:494-504.
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    File URL: http://hdl.handle.net/10.2307/1237256
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    Cited by:

    1. Walker, Odell L. & Hardin, Mike L. & Mapp, Harry P., Jr. & Roush, Clint E., 1979. "Farm Growth And Estate Transfer In An Uncertain Environment," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 11(1), pages 1-12, July.
    2. Ben Groom & Phoebe Koundouri & Celine Nauges & Alban Thomas, 2003. "Irrigation water management under risk: An application to Cyprus," DEOS Working Papers 0306, Athens University of Economics and Business.

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