INFORMATION VALUE AND RISK PREMIUM IN AGRICULTURAL PRODUCTION UNDER RISK: THE CASE OF SPLIT NITROGEN APPLICATION FOR CORN

This paper considers an agricultural production model of sequential nitrogen application under risk. Because of random shocks between successive production stages, optimal fertilization decisions depend on the magnitude of farmers' risk aversion (risk premium), and the possibility for farmers to process information (value of information). We propose a joint estimation procedure of technology and risk aversion parameters, using a structural, simulation-based econometric technique. Parameter estimates for the representative farmer's utility function allow to compute both the value of information and the risk premium for farmers. Those account together for about 30 percent of fertilizer cost for Midwest corn producers.


Issue Date:
1998
Publication Type:
Conference Paper/ Presentation
DOI and Other Identifiers:
Record Identifier:
https://ageconsearch.umn.edu/record/20844
PURL Identifier:
http://purl.umn.edu/20844
Total Pages:
14
Series Statement:
Selected Paper




 Record created 2017-04-01, last modified 2019-08-26

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