When to Get In and Out of Dairy Farming: A Real Option Analysis

The Dixit entry/exit real option model, modified to accommodate a milk price support regime, was applied to the entry/exit decisions of New York dairy farmers. Results varied by farm size, but for the 500-cow farm the entry milk price is $19.09 and the exit milk price is $11.66 when farmers were allowed to continuously enter and exit the industry. With no option to ever return to dairy farming, the exit milk price falls to $10.00.


Issue Date:
2004-10
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/127151
Total Pages:
25
Series Statement:
WP 2004-12




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

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