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Comparison of the investment behavior of Kazakhstani and German farmers: An experimental approach

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  • Tubetov, Dulat
  • Maart, Syster Christin
  • Musshoff, Oliver

Abstract

The agricultural sectors of Kazakhstan and Germany are at different development levels. One possible explanation for this might be the different investment behavior of farmers. We experimentally analyze whether the investment behavior of farmers is consistent with the normative benchmarks of the net present value criterion or the real options approach. Furthermore, we experimentally compare the investment behavior of farmers in the two countries in an agricultural and a non-agricultural treatment. In addition, farmers were confronted with the two treatments in a different order. Our results show that both theories cannot exactly predict the investment behavior of farmers. Farmers invest later than the net present value criterion suggests and earlier than the real options approach suggests. However, German farmers invest later than Kazakhstani farmers, which mean that the investment behavior of German farmers is closer to the superior real options approach. Therefore, the different investment behavior might partly be an explanation for different development levels of the agricultural sectors of the two countries. Moreover, results are independent from the framing of an agricultural and a non-agricultural treatment. However, farmers learn from their former investment decisions and consider the value of waiting over time.

Suggested Citation

  • Tubetov, Dulat & Maart, Syster Christin & Musshoff, Oliver, 2012. "Comparison of the investment behavior of Kazakhstani and German farmers: An experimental approach," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 125218, International Association of Agricultural Economists.
  • Handle: RePEc:ags:iaae12:125218
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    Keywords

    Experimental Economics; Investment Timing; Real Options; Kazakhstan; Germany; Agricultural Finance; Institutional and Behavioral Economics; Risk and Uncertainty; C91; D03; D81; D92;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing

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