When to Get In and Out of Dairy Farming: A Real Option Analysis
The Dixit entry/exit real option model, modified to accommodate a milk price support regime, was applied to the entry/exit decisions of New York dairy farmers. Results varied by farm size, but for the 500-cow farm the entry milk price is $19.09 and the exit milk price is $11.66 when farmers were allowed to continuously enter and exit the industry. With no option to ever return to dairy farming, the exit milk price falls to $10.00.
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.:
- McDonald, Robert L & Siegel, Daniel R, 1985. "Investment and the Valuation of Firms When There Is an Option to Shut Down," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(2), pages 331-49, June.
- Tomek, William G., 2000. "Commodity Prices Revisited," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 29(2), October.
- Caballero, Ricardo J & Pindyck, Robert S, 1996.
"Uncertainty, Investment, and Industry Evolution,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(3), pages 641-62, August.
- Ricardo J. Caballero & Robert S. Pindyck, 1992. "Uncertainty, Investment, and Industry Evolution," NBER Working Papers 4160, National Bureau of Economic Research, Inc.
- Caballero, Ricardo J. & Pindyck, Robert S., 1992. "Uncertainty, investment, and industry evolution," Working papers 3460-92., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Leahy, John V, 1993. "Investment in Competitive Equilibrium: The Optimality of Myopic Behavior," The Quarterly Journal of Economics, MIT Press, vol. 108(4), pages 1105-33, November.
- Engel, Phoebe D. & Hyde, Jeffrey, 2003. "A Real Options Analysis of Automatic Milking Systems," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 32(2), October.
- Dixit, A., 1988.
"Entry And Exit Decisions Under Uncertainty,"
91, Princeton, Department of Economics - Financial Research Center.
- Tweeten, Luther G & Quance, C Leroy, 1969. "Positivistic Measures of Aggregate Supply Elasticities: Some New Approaches," American Economic Review, American Economic Association, vol. 59(2), pages 175-83, May.
- Janis M. Carey & David Zilberman, 2002. "A Model of Investment under Uncertainty: Modern Irrigation Technology and Emerging Markets in Water," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(1), pages 171-183.
- Timothy J. Richards & Paul M. Patterson, 1998. "Hysteresis and the Shortage of Agricultural Labor," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(4), pages 683-695.
- Tomek, William G., 2000. "Commodity Prices Revisited," Staff Papers 121146, Cornell University, Department of Applied Economics and Management.
- Bryant, Amy & Richards, Timothy J., 1998. "Hysteresis And The Shortage Of Agricultural Labor," 1998 Annual meeting, August 2-5, Salt Lake City, UT 20858, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- Short, Sara D. & Livezey, Janet S., 2004. "Characteristics and Production Costs," Amber Waves, United States Department of Agriculture, Economic Research Service, April.
- McDonald, Robert & Siegel, Daniel, 1986. "The Value of Waiting to Invest," The Quarterly Journal of Economics, MIT Press, vol. 101(4), pages 707-27, November.
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpfi:0504018. 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: (EconWPA)
If references are entirely missing, you can add them using this form.