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Abstract

This paper presents a theoretical framework for incorporating the following sources of risk into the determination of optimal fertilization rates: (a) the influence of weather and other stochastic factors on the marginal product of fertilizer, and (b) uncertainty about the coefficients of the response function. The decision criterion considered is the maximization of profit subject to a risk constraint on the probability of not recovering the cost of the fertilizer. The theoretical framework is applied to the fertilization of dryland grain sorghum in the Texas Blacklands. Results indicate that the risk averse producer should substantially lower his fertilization rate if soil moisture at fertilization time is low.

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