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Stochastic Efficiency Analysis Using Multiple Utility Functions

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  • Schumann, Keith D.
  • Richardson, James W.
  • Lien, Gudbrand D.
  • Hardaker, J. Brian

Abstract

Evaluating the risk of a particular decision depends on the risk aversion of the decision maker related to the underlying utility function. The objective of this paper is to use stochastic efficiency with respect to a function (SERF) to compare the ranking of risky alternatives using alternative utility functional forms.

Suggested Citation

  • Schumann, Keith D. & Richardson, James W. & Lien, Gudbrand D. & Hardaker, J. Brian, 2004. "Stochastic Efficiency Analysis Using Multiple Utility Functions," 2004 Annual meeting, August 1-4, Denver, CO 19957, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea04:19957
    DOI: 10.22004/ag.econ.19957
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    File URL: https://ageconsearch.umn.edu/record/19957/files/sp04sc10.pdf
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    References listed on IDEAS

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    1. J. Brian Hardaker & James W. Richardson & Gudbrand Lien & Keith D. Schumann, 2004. "Stochastic efficiency analysis with risk aversion bounds: a simplified approach," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 48(2), pages 253-270, June.
    2. McCarl, Bruce A. & Bessler, David A., 1989. "Estimating An Upper Bound On The Pratt Risk A Version Coefficient When The Utility Function Is Unknown," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 33(1), pages 1-8, April.
    3. Meyer, Jack, 1977. "Choice among distributions," Journal of Economic Theory, Elsevier, vol. 14(2), pages 326-336, April.
    4. Robert P. King & Lindon J. Robison, 1981. "An Interval Approach to Measuring Decision Maker Preferences," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 63(3), pages 510-520.
    5. Hadar, Josef & Russell, William R, 1969. "Rules for Ordering Uncertain Prospects," American Economic Review, American Economic Association, vol. 59(1), pages 25-34, March.
    6. Anderson, Jock R. & Dillon, John L. & Hardaker, Brian, 1977. "Agricultural Decision Analysis," Monographs: Applied Economics, AgEcon Search, number 288652, October.
    7. Anderson, Jock R. & Feder, Gershon, 2007. "Agricultural Extension," Handbook of Agricultural Economics, in: Robert Evenson & Prabhu Pingali (ed.),Handbook of Agricultural Economics, edition 1, volume 3, chapter 44, pages 2343-2378, Elsevier.
    8. G. Hanoch & H. Levy, 1969. "The Efficiency Analysis of Choices Involving Risk," Review of Economic Studies, Oxford University Press, vol. 36(3), pages 335-346.
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    Cited by:

    1. Williams, Jeffery R. & Llewelyn, Richard V. & Pendell, Dustin L. & Schlegel, Alan J. & Troy, Dumler, 2009. "A Risk Analysis of Converting CRP Acres to a Wheat-Sorghum-Fallow Rotation," 2009 Annual Meeting, January 31-February 3, 2009, Atlanta, Georgia 45985, Southern Agricultural Economics Association.
    2. Adusumilli, Naveen & Wang, Hua & Dodla, Syam & Deliberto, Michael, 2020. "Estimating risk premiums for adopting no-till and cover crops management practices in soybean production system using stochastic efficiency approach," Agricultural Systems, Elsevier, vol. 178(C).
    3. Schenk, Joep & Hellegers, Petra & van Asseldonk, Marcel & Davidson, Brian, 2014. "How do farmers react to varying water allocations? An assessment of how the attitude to risk affects farm incomes," Agricultural Water Management, Elsevier, vol. 136(C), pages 52-58.

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