When to Get In and Out of Dairy Farming: A Real Option Analysis

The Dixit entry/exit real option model was applied to the entry/exit decisions of New York dairy farmers. For the cost structure of a 500-cow farm, the entry milk price is $17.52 per hundredweight (cwt) and the exit milk price is $10.84. For the 50-cow farm cost structure, the entry price is higher at $23.71 per cwt, and the exit price is also higher at $13.48. If infinite numbers of representative farms enter and exit at these prices, the price of milk should range between $13.48 and $17.52 per cwt.


Subject(s):
Issue Date:
2006-10
Publication Type:
Journal Article
DOI and Other Identifiers:
Record Identifier:
https://ageconsearch.umn.edu/record/10219
PURL Identifier:
http://purl.umn.edu/10219
Published in:
Agricultural and Resource Economics Review, 35, 2
Page range:
339-347
Total Pages:
9




 Record created 2017-04-01, last modified 2020-10-28

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