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Information Value And Risk Premium In Agricultural Production Under Risk: The Case Of Split Nitrogen Application For Corn

  • Thomas, Alban
  • Bontems, Philippe

This paper considers an agricultural production model of sequential nitrogen application under risk. Because of random shocks between successive production stages, optimal fertilization decisions depend on the magnitude of farmers' risk aversion (risk premium), and the possibility for farmers to process information (value of information). We propose a joint estimation procedure of technology and risk aversion parameters, using a structural, simulation-based econometric technique. Parameter estimates for the representative farmer's utility function allow to compute both the value of information and the risk premium for farmers. Those account together for about 30 percent of fertilizer cost for Midwest corn producers.

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File URL: http://purl.umn.edu/20844
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Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 1998 Annual meeting, August 2-5, Salt Lake City, UT with number 20844.

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Date of creation: 1998
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Handle: RePEc:ags:aaea98:20844
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  1. Fafchamps, Marcel, 1993. "Sequential Labor Decisions under Uncertainty: An Estimable Household Model of West-African Farmers," Econometrica, Econometric Society, vol. 61(5), pages 1173-97, September.
  2. Feinerman, Eli & Kwan, E. & Johnson, Stanley R., 1990. "Uncertainty and Split Nitrogen Application in Corn Production," Staff General Research Papers 328, Iowa State University, Department of Economics.
  3. Lambert, David K., 1990. "Risk Considerations In The Reduction Of Nitrogen Fertilizer Use In Agricultural Production," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 15(02), December.
  4. Feinerman, Eli & Choi, E. Kwan & Johnson, Stanley R., 1990. "Uncertainty and Split Nitrogen Application in Corn Production," Staff General Research Papers 10598, Iowa State University, Department of Economics.
  5. Chavas, Jean-Paul & Holt, Matthew T, 1996. "Economic Behavior under Uncertainty: A Joint Analysis of Risk Preferences and Technology," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 329-35, May.
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