Conceptualisation of family farms’ flexibility
Agricultural enterprises in transition countries face dynamic changes in the prevailing economic, legal and political conditions. The success of an enterprise depends on its ability to adjust its farming system in response to these changing conditions. To meet this challenge, flexible and adaptable production technology is required. Thus, the farm’s choice of technology is an important decision which determines its future performance. Although the concept of a firm’s flexibility is widely analysed in microeconomics literature, there is no comprehensive framework to facilitate the analysis of family farms’ flexibility, especially considering market imperfections and other obstacles associated with the transition process. In this paper we formulate the theoretical framework for flexibility analysis in order to investigate the impact of farm-specific characteristics on optimal flexibility design and to explain the differences between farms using different production technologies. In a simplified formal model, a competitive risk-averse firm producing one product is assumed to face fluctuating demand under uncertainty. By choosing the level of flexibility, the decision-maker determines the technology of the firm, expressed by the cost function. The optimal level of flexibility will be found by backward induction in the two-stage decision-making process, including ex ante technology decision and ex post output level decision. Using comparative statics and existing theoretical literature, some hypothesis about the relationship between flexibility and other firm characteristics will be formalised. Some possible model extensions that account for specific characteristics of the family farm business in transition countries, as well as future empirical analysis are discussed.
|Date of creation:||2008|
|Contact details of provider:|| Web page: http://www.eaae.org|
More information through EDIRC
References listed on IDEAS
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.:
- Mills, David E & Schumann, Laurence, 1985. "Industry Structure with Fluctuating Demand," American Economic Review, American Economic Association, vol. 75(4), pages 758-767, September.
- Zeller, Manfred & Robison, Lindon J, 1992. "Flexibility and Risk in the Firm," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 19(4), pages 473-484.
- Mills, David E, 1984. "Demand Fluctuations and Endogenous Firm Flexibility," Journal of Industrial Economics, Wiley Blackwell, vol. 33(1), pages 55-71, September.
- Weiss, Christoph R., 2001. "On flexibility," Journal of Economic Behavior & Organization, Elsevier, vol. 46(3), pages 347-356, November.
- Zimmermann, Klaus F., 1995. "Flexibility in the face of demand fluctuations: Employment, capacity utilization, and industry structure," International Journal of Industrial Organization, Elsevier, vol. 13(2), pages 179-193.
- Das, Bhaskar J & Chappell, William F & Shughart, William F, II, 1993. "Demand Fluctuations and Firm Heterogeneity," Journal of Industrial Economics, Wiley Blackwell, vol. 41(1), pages 51-60, March.
When requesting a correction, please mention this item's handle: RePEc:ags:eaae08:44126. 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 you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.