@article{Khanna:176255,
      recid = {176255},
      author = {Khanna, Madhu and Isik, Murat and Winter-Nelson, Alex},
      title = {Investment in site-specific crop management under  uncertainty: implications for nitrogen pollution control  and environmental policy},
      journal = {Agricultural Economics: The Journal of the International  Association of Agricultural Economists},
      address = {2000-12},
      number = {968-2016-75335},
      pages = {14},
      year = {2000},
      abstract = {This paper applies an option-pricing model to analyze the  impact of uncertainty about output prices and expectations  of
declining fixed costs on the optimal timing of  investment in site-specific crop management (SSCM). It also  analyzes the extent
to which the level of spatial  variability in soil conditions can mitigate the value of  waiting to invest in SSCM and influence
the optimal timing  of adoption and create a preference for custom hiring  rather than owner purchase of equipment.  Numerical
simulations show that while the net present value  (NPV) rule predicts that immediate adoption is profitable  under most of the
soil conditions considered here,  recognition of the option value of investment indicates  that it is preferable to delay investment
in SSCM for at  least 3 years unless average soil quality is high and the  variability in soil quality and fertility is high. The  use
of the option value approach reveals that the value of  waiting to invest in SSCM raises the cost-share subsidy  rates required
to induce immediate adoption above the  levels indicated by the NPV rule. © 2000 Elsevier Science  B.V. All rights reserved.},
      url = {http://ageconsearch.umn.edu/record/176255},
      doi = {https://doi.org/10.22004/ag.econ.176255},
}