IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Impact of Price Floors: A Real Options Based Experimental Approach

  • Maart, Syster Christin
  • Musshoff, Oliver
  • Maack, Moritz

In order to stimulate investments, agricultural policies frequently use price floors, which guarantee a price above a certain limit. In some cases, however, a price floor does not have the desired effects. In this study, we experimentally analyse differences in the investment behaviour with respect to the presence of a price floor and compare the actual investment behaviour to normative benchmarks of the net present value and the real options approach. Furthermore, we look at treatment order and learning effects. The results show that the price floor has no significant impact on the decision behaviour of participants, whereas the effects of treatment order were statistically significant. Regarding the analysis of policy impacts, the latter result shows that the investment reluctance arising from an abolishment of a price floor is stronger than the investment stimulation arising from the introduction of a price floor. Consequently, neither the net present value nor the real options approach is appropriate to predict the investment behaviour in general. Nevertheless, we found out that the predictions of the real options approach enable an approximation of the participants’ investment behaviour if the individuals have an adequate chance to learn from personal experience.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://purl.umn.edu/126073
Download Restriction: no

Paper provided by International Association of Agricultural Economists in its series 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil with number 126073.

as
in new window

Length:
Date of creation: 2012
Date of revision:
Handle: RePEc:ags:iaae12:126073
Contact details of provider: Web page: http://www.iaae-agecon.org/
Email:


More information through EDIRC

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ags:iaae12:126073. 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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.