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Optimal Information Acquisition Under a Geostatistical Model

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  • Pautsch, Gregory R.
  • Babcock, Bruce A.
  • Breidt, F. J.

Abstract

Studies examining the value of switching to a variable rate technology (VRT) fertilizer program assume producers possess perfect soil nitrate information. In reality, producers estimate soil nitrate levels with soil sampling. The value of switching to a VRT program depends on the quality of the estimates and on how the estimates are used. Larger sample sizes, increased spatial correlation, and decreased variability improve the estimates and increase returns. Fertilizing strictly to the estimated field map fails to account for estimation risk. Returns increase if the soil sample information is used in a Bayesian fashion to update the soil nitrate beliefs in nonsampled sites.

Suggested Citation

  • Pautsch, Gregory R. & Babcock, Bruce A. & Breidt, F. J., 1999. "Optimal Information Acquisition Under a Geostatistical Model," Staff General Research Papers Archive 1517, Iowa State University, Department of Economics.
  • Handle: RePEc:isu:genres:1517
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    References listed on IDEAS

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    1. Lence, Sergio H. & Hayes, Dermot J., 1995. "Land Allocation In The Presence Of Estimation Risk," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 20(01), July.
    2. Hennessy, David A. & Babcock, Bruce A., 1998. "Information, flexibility, and value added1," Information Economics and Policy, Elsevier, vol. 10(4), pages 431-449, December.
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    6. Babcock, Bruce A. & Pautsch, Gregory R., 1998. "Moving From Uniform To Variable Fertilizer Rates On Iowa Corn: Effects On Rates And Returns," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 23(02), December.
    7. Sergio H. Lence & Dermot J. Hayes, 1994. "The Empirical Minimum-Variance Hedge," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 76(1), pages 94-104.
    8. Swinton, Scott M. & Jones, Kezelee Q., 1998. "From Data To Information: The Value Of Sampling Vs. Sensing Soil Data," Staff Papers 11674, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    9. Babcock, Bruce A., 1992. "Effects of Uncertainty on Optimal Nitrogen Applications (The)," Staff General Research Papers Archive 10588, Iowa State University, Department of Economics.
    10. Sergio H. Lence & Dermot J. Hayes, 1993. "Empirical Minimum Variance Hedge, The," Center for Agricultural and Rural Development (CARD) Publications 93-wp109, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    11. Wesley N. Musser & James S. Shortle & Kathleen Kreahling & Brian Roach & Wen-Chi Huang & Douglas B. Beegle & Richard H. Fox, 1995. "An Economic Analysis of the Pre-sidedress Nitrogen Test for Pennsylvania Corn Production," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 17(1), pages 25-35.
    12. Babcock, Bruce A. & Carriquiry, Alicia L. & Stern, Hal S., 1996. "Evaluation of Soil Test Information in Agricultural Decision-Making," Staff General Research Papers Archive 1139, Iowa State University, Department of Economics.
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    15. Bruce A. Babcock & Alicia L. Carriquiry & Hal S. Stern, 1996. "Evaluation of Soil Test Information in Agricultural Decision Making, An," Center for Agricultural and Rural Development (CARD) Publications 96-wp147, Center for Agricultural and Rural Development (CARD) at Iowa State University.
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    Cited by:

    1. Rejesus, Roderick M. & Nelson, Carl H., 2000. "Determinants Of The Value Of Site-Specific Information (Ssi) In Agriculture: A Unifying Theory To Analyze Its Relative Impacts," 2000 Annual meeting, July 30-August 2, Tampa, FL 21779, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. Lichtenberg, Erik & Majsztrik, John & Saavoss, Monica, 2014. "Willingness to Pay for Sensor-Controlled Irrigation," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 168211, Agricultural and Applied Economics Association.
    3. Tembo, Gelson & Brorsen, B. Wade & Epplin, Francis M., 2003. "Linear Response Stochastic Plateau Functions," 2003 Annual Meeting, February 1-5, 2003, Mobile, Alabama 35217, Southern Agricultural Economics Association.
    4. Isik, Murat & Khanna, Madhu, 2002. "Variable-Rate Nitrogen Application Under Uncertainty: Implications For Profitability And Nitrogen Use," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 27(01), July.
    5. Hurley, Terrance M. & Kilian, Bernard & Malzer, Gary L. & Dikici, Huseyin, 2001. "The Value Of Information For Variable Rate Nitrogen Applications: A Comparison Of Soil Test, Topographical, And Remote Sensing Information," 2001 Annual meeting, August 5-8, Chicago, IL 20726, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    6. Lindset, Snorre & Lund, Arne-Christian & Matsen, Egil, 2009. "Optimal information acquisition for a linear quadratic control problem," European Journal of Operational Research, Elsevier, vol. 199(2), pages 435-441, December.
    7. Biermacher, Jon T. & Epplin, Francis M. & Brorsen, B. Wade & Solie, John B. & Raun, Bill, 2006. "Precision Nitrogen Fertilization Technology with Micro Grids," 2006 Annual meeting, July 23-26, Long Beach, CA 21046, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    8. McFadden, Brandon R. & Lusk, Jayson L., 2015. "Cognitive biases in the assimilation of scientific information on global warming and genetically modified food," Food Policy, Elsevier, vol. 54(C), pages 35-43.

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