Risk, uncertainty and pasture investment decisions
The private decisions of farmers to invest in new technologies interest economists because these decisions influence the rate of farm productivity growth and the returns to public investment in agricultural research and development. Economic analysis of decisions to invest in new technologies on farms involves considering the effects of these decisions on the profitability and risk of the farm business. This is done routinely using whole-farm economic models and techniques such as stochastic simulation. Such analysis can be used to predict the extent to which a technology is likely to be adopted in equilibrium, when the consequences of adoption are known to all potential adopters. Until this equilibrium is reached, however, potential adopters of new technologies face uncertainty about the consequences of adoption. This alters expectations about the effects on profitability and risk of adoption, and hence alters investment decisions. The resolution of uncertainty over time through learning is therefore a key determinant of the rate at which new technologies are adopted, and hence should be represented in dynamic economic models which seek to explain these decisions.
|Date of creation:||2011|
|Date of revision:|
|Contact details of provider:|| Postal: AARES Central Office Manager, Crawford School of Public Policy, ANU, Canberra ACT 0200|
Phone: 0409 032 338
Web page: http://www.aares.info/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ghadim, Amir K. Abadi & Pannell, David J., 1999.
"A conceptual framework of adoption of an agricultural innovation,"
Agricultural Economics of Agricultural Economists,
International Association of Agricultural Economists, vol. 21(2), October.
- Abadi Ghadim, Amir K. & Pannell, David J., 1999. "A conceptual framework of adoption of an agricultural innovation," Agricultural Economics, Blackwell, vol. 21(2), pages 145-154, October.
When requesting a correction, please mention this item's handle: RePEc:ags:aare11:100566. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search)
If references are entirely missing, you can add them using this form.