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Risk, risk aversion and agricultural technology adoption a combination of real options and stochastic dominance

Author

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  • Spiegel, A.
  • Britz, W.
  • Finger, R.

Abstract

We propose a novel approach to capture risk and risk aversion for agricultural technology adoption by integrating second order stochastic dominance in a farm-level model based on real options. We employ an illustrative case study of perennial energy crop adoption. In our example, we found that risk aversion leads to smaller and earlier adoption of a new technology; in contrast, higher subjective riskiness increases expected scale and first slow down and then accelerate adoption. Those effects would have been obscured if technology adoption would have been considered as standing-alone or as now-or-never decision. Acknowledgement :

Suggested Citation

  • Spiegel, A. & Britz, W. & Finger, R., 2018. "Risk, risk aversion and agricultural technology adoption a combination of real options and stochastic dominance," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277421, International Association of Agricultural Economists.
    • Handle: RePEc:ags:iaae18:277421
    DOI: 10.22004/ag.econ.277421
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    Cited by:

    1. Oyetunde-Usman, Zainab & Shee, Apurba & Abdoulaye, Tahirou, 2021. "Does Simultaneous Adoption of Drought Tolerant Maize Varieties and Organic Manure Impact Productivity and Welfare Outcomes of Farm-households in Nigeria?," 2021 Annual Meeting, August 1-3, Austin, Texas 313954, Agricultural and Applied Economics Association.
    2. Barnes, A.P. & McMillan, J. & Sutherland, L.-A. & Hopkins, J. & Thomson, S.G., 2022. "Farmer intentional pathways for net zero carbon: Exploring the lock-in effects of forestry and renewables," Land Use Policy, Elsevier, vol. 112(C).
    3. Xinyan Hu & Xiangpo Chen & Siqi Yao & Gaiqing Zhang, 2022. "The Great Chinese Famine (1959–1961) and farm households’ adoption of technology: evidence from China," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 66(1), pages 93-117, January.

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    Keywords

    Risk and Uncertainty;

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