Confirming the precision agriculture hypothesis for variable rate nitrogen applications (VRA) has proven challenging. To confront this challenge, researchers have begun to use increasingly sophisticated statistical models to estimate and compare site-specific crop response functions. While progress has been made, we believe it has been hampered by the lack of a clear conceptual framework to guide and motivate the development of appropriate models and methods. The purpose of this paper was to provide such a framework, while demonstrating its utility. The framework was used to develop a heteroscedastic, fixed and random effects, geostatistical model to test the potential for VRA to increase nitrogen returns. The model was implemented with data collected in 1995 from two corn nitrogen response experiments conducted in South Central Minnesota. Results of the analysis indicate there is significant potential to increase nitrogen returns using VRA. At one location, there was greater than a 95 percent chance that VRA would have increased profitability if the cost of implementing VRA was less than 14.5 $ ha-1. At the other location, if implementation costs were less than 48.3 $ ha-1, there was greater than a 95 percent chance for increased profitability through VRA.