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Policy impact analysis in competitive agricultural markets: a real options approach

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  • Jan-Henning Feil
  • Oliver Musshoff
  • Alfons Balmann

Abstract

In consequence of strong changes in general economic conditions, adjustments in the agricultural sector can be expected. To date, however, there are only few policy impact analyses on agricultural investments in a dynamic-stochastic context. The objective of this paper is to develop a real options market model which allows the impact assessment of different political schemes. The model combines genetic algorithms and stochastic simulation. Simulations of the model show that investment subsidies and production ceilings are preferable to price floors because the welfare is less reduced for a given stimulation of the willingness to invest. , Oxford University Press.

Suggested Citation

  • Jan-Henning Feil & Oliver Musshoff & Alfons Balmann, 2013. "Policy impact analysis in competitive agricultural markets: a real options approach," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 40(4), pages 633-658, September.
    • Handle: RePEc:oup:erevae:v:40:y:2013:i:4:p:633-658
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    File URL: http://hdl.handle.net/10.1093/erae/jbs033
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    Citations

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    Cited by:

    1. Wolbert-Haverkamp, Matthias & Feil, Jan-Henning & Mußhoff, Oliver, 2014. "The value chain of heat production from woody biomass under market competition and different intervention systems: An agent-based real options model," DARE Discussion Papers 1407, Georg-August University of Göttingen, Department of Agricultural Economics and Rural Development (DARE).
    2. Nagy, Roel L.G. & Fleten, Stein-Erik & Sendstad, Lars H., 2023. "Don’t stop me now: Incremental capacity growth under subsidy termination risk," Energy Policy, Elsevier, vol. 172(C).
    3. Feil, Jan-Henning & Musshoff, Oliver, 2013. "Investment, disinvestment and policy impact analysis in the dairy sector: a real options approach," Structural Change in Agriculture/Strukturwandel im Agrarsektor (SiAg) Working Papers 159229, Humboldt University Berlin, Department of Agricultural Economics.
    4. Feil, Jan-Henning & Musshoff, Oliver, 2013. "Modelling investment and disinvestment decisions under competition, uncertainty and different market interventions," Economic Modelling, Elsevier, vol. 35(C), pages 443-452.
    5. Cave, Jonathan & Gibson, Stephen, 2023. "Primary and secondary legislation – assessing the impacts of rules for making rules," The Warwick Economics Research Paper Series (TWERPS) 1486, University of Warwick, Department of Economics.
    6. Graubner, Marten & Sexton, Richard J., 2023. "More competitive than you think? Pricing and location of processing firms in agricultural markets," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 105(3), pages 784-808.
    7. Marten Graubner & Richard J. Sexton, 2023. "More competitive than you think? Pricing and location of processing firms in agricultural markets," American Journal of Agricultural Economics, John Wiley & Sons, vol. 105(3), pages 784-808, May.
    8. Ihli, Hanna Julia & Gassner, Anja & Musshoff, Oliver, 2018. "Experimental insights on the investment behavior of small-scale coffee farmers in central Uganda under risk and uncertainty," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 75(C), pages 31-44.
    9. Di Corato, Luca & Brady, Mark, 2016. "Passive farming and land development: a real option approach," Working Paper Series 2016:4, Swedish University of Agricultural Sciences, Department Economics.
    10. Spiegel, Alisa & Britz, Wolfgang & Djanibekov, Utkur & Finger, Robert, 2017. "Policy analysis of perennial energy crops cultivation at the farm level: the case of short rotation coppice (SRC) in Germany," Discussion Papers 263448, University of Bonn, Institute for Food and Resource Economics.
    11. Balmann, Alfons & Kataria, Karin & Musshoff, Oliver, 2013. "Investment reluctance in supply chains: An agent-based real options approach," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 3(2A), pages 1-10.
    12. Sansi Yang & C. Richard Shumway, 2020. "Knowledge accumulation in US agriculture: research and learning by doing," Journal of Productivity Analysis, Springer, vol. 54(2), pages 87-105, December.
    13. Spiegel, Alisa & Britz, Wolfgang & Djanibekov, Utkur & Finger, Robert, 2017. "Policy analysis of perennial energy crops cultivation at the farm level: the case of short rotation coppice in Germany," 57th Annual Conference, Weihenstephan, Germany, September 13-15, 2017 261989, German Association of Agricultural Economists (GEWISOLA).
    14. Di Corato, Luca & Brady, Mark V., 2019. "Passive farming and land development: A real options approach," Land Use Policy, Elsevier, vol. 80(C), pages 32-46.

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