@article{Min:277316,
      recid = {277316},
      author = {Min, S. and Wang, X. and Liu, M. and Huang, J.},
      title = {The Asymmetric Response of Farmers to the Expected Change  of Rubber Price: the Roles of Sunk Cost and Path  Dependency},
      address = {2018-07},
      year = {2018},
      abstract = {This study examines the impacts of sunk cost and path  dependency on farmers' responses to the expected price  change. A simple choice experiment was implemented to  collect the responses of farmers to the hypothetical change  in rubber price. The results show that near 73% of farmers  choose to adjust their productive behaviors when rubber  price is hypothesized to increase by 50%, while it is only  about 55% when rubber price is hypothesized to increase by  50%. The responses of farmers to these two hypothetical  changes in rubber price are significantly asymmetrical. The  sunk cost and path dependency of rubber farming are proxied  by the planting area of and experience in rubber farming,  respectively. The estimation results of a bivariate probit  model indicate that the higher sunk cost and longer path  dependency of rubber farming significantly hinder farmers'  probabilities to adjust their productive behaviors in the  response to the two hypothetical changes in rubber price.  The significant difference in the impacts of sunk cost and  path dependency on the choice of response behaviors under  the two hypothetical situations may help to explain the  observed asymmetric response. The impacts of sunk cost and  path dependency on the choice of specific productive  adjusting behavior are heterogeneous. 

Acknowledgement :   This study has been conducted in the framework of the  Sino-German  SURUMER Project , funded by the  Bundesministerium f r Wissenschaft, Technologie und  Forschung (BMBF), FKZ: 01LL0919. I also acknowledge the  funding support from National Natural Sciences of China  (71742002; 71673008) and China Postdoctoral Science  Foundation (8201400850).},
      url = {http://ageconsearch.umn.edu/record/277316},
      doi = {https://doi.org/10.22004/ag.econ.277316},
}