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Marketed Surplus under Risk: Do Peasants Agree with Sandmo?

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  • Israel Finkelshtain
  • James A. Chalfant

Abstract

Using a newly defined notion of aversion to income risk, the behavior of the marketed-surplus producer under price risk is characterized. Unlike the familiar case first examined by Sandmo, output depends on both ordinal preferences for goods and on risk attitudes. Conditions are found that yield an output level under risk that is smaller than under certainty. If these conditions do not hold, both risk and risk aversion may have a positive effect on output. Implications for econometric studies of risk attitudes are considered and illustrated with an example. Finally, we examine the effect of uncertainty on the peasant's long-run equilibrium.

Suggested Citation

  • Israel Finkelshtain & James A. Chalfant, 1991. "Marketed Surplus under Risk: Do Peasants Agree with Sandmo?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(3), pages 557-567.
  • Handle: RePEc:oup:ajagec:v:73:y:1991:i:3:p:557-567.
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    Citations

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    Cited by:

    1. Wang, Xiaobing, 2007. "Labor market behavior of Chinese rural households during transition," Studies on the Agricultural and Food Sector in Transition Economies, Leibniz Institute of Agricultural Development in Transition Economies (IAMO), volume 42, number 92321.
    2. Christopher Barrett, 1993. "On the Price Risk and the Inverse Farm Size-Productivity Relationship," Wisconsin-Madison Agricultural and Applied Economics Staff Papers 369, Wisconsin-Madison Agricultural and Applied Economics Department.
    3. Larochelle, Catherine & Alwang, Jeffrey, 0. "Explaining Marketing Strategies among Bolivian Potato Farmers," Quarterly Journal of International Agriculture, Humboldt-Universität zu Berlin, vol. 54.
    4. Subramanian, Arjunan & Qaim, Matin, 2006. "Competition, Kinship or Reciprocity? Village Experiments in Alternative Modes of Exchange," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25434, International Association of Agricultural Economists.
    5. BROSIG, Stephan & GLAUBEN, Thomas & Herzfeld, Thomas & WANG, Xiaobing, 2009. "Persistence of full- and part-time farming in Southern China," China Economic Review, Elsevier, vol. 20(2), pages 360-371, June.
    6. Barrett, Christopher B., 1999. "The microeconomics of the developmental paradox: on the political economy of food price policy," Agricultural Economics, Blackwell, vol. 20(2), pages 159-172, March.
    7. Harris, Rebecca Lee & Robinson, Sherman, 2001. "Economy-wide effects of El Niño / Southern Oscillation (ENSO) in Mexico and the role of improved forecasting and technological change," TMD discussion papers 83, International Food Policy Research Institute (IFPRI).
    8. Saenger, Christoph & Torero, Maximo & Qaim, Matin, 2016. "Impact of third-party enforcement of contracts in agricultural markets—A field experiment in Vietnam," IFPRI book chapters,in: Innovation for inclusive value-chain development: Successes and challenges, chapter 11, pages 343-374 International Food Policy Research Institute (IFPRI).
    9. Lee, Yu Na & Bellemare, Marc F. & Just, David R., 2015. "Was Sandmo Right? Experimental Evidence on Attitudes to Price Risk and Uncertainty," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205763, Agricultural and Applied Economics Association;Western Agricultural Economics Association.
    10. J. Taylor & Irma Adelman, 2003. "Agricultural Household Models: Genesis, Evolution, and Extensions," Review of Economics of the Household, Springer, vol. 1(1), pages 33-58, January.
    11. Thiagu Ranganathan & Usha Ananthakumar, 2017. "Hedging in Presence of Crop Yield, Crop Revenue and Rainfall Insurance," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 15(1), pages 151-171, March.
    12. Sadoulet, Élisabeth, 2000. "Conférence François-Albert Angers (2000). Marchés imparfaits et modélisation des comportements des ménages paysans : où en sommes-nous?," L'Actualité Economique, Société Canadienne de Science Economique, vol. 76(4), pages 459-489, décembre.
    13. Crainich, David & Eeckhoudt, Louis & Le Courtois, Olivier, 2017. "Health and portfolio choices: A diffidence approach," European Journal of Operational Research, Elsevier, vol. 259(1), pages 273-279.
    14. Zhen Liu & Arne Henningsen, 2016. "The effects of China's Sloping Land Conversion Program on agricultural households," Agricultural Economics, International Association of Agricultural Economists, vol. 47(3), pages 295-307, May.

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