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Abstract

Innovation and new technology adoption represent two central elements for the enterprise and industry development process in agriculture. The objective of this paper is to develop a farm-household model able to simulate the impacts of uncertainty in SFP, the selling price of energy and agricultural product prices parameters on the adoption of methane digester for biogas production. The model implemented is based on a real option approach that includes investment irreversibility and stochasticity in relevant parameters. The results show the relevance of uncertainty in determining the timing of adoption and emphasise the importance of predictability as a major component of policy design.

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