THE ECONOMIC EFFICIENCY OF DIVERSIFICATION: CERTAINTY EQUIVALENCE AND THE MEAN-VARIANCE MODEL

The marginal benefit and cost of diversification for Florida orange producers is studied using certainty equivalents. The primary contribution of this study is the application of the mean-variance model to farm management decisions. Results indicate that for moderate and high levels of risk aversion, diversification into strawberry, grapefruit, or additional orange production is not optimal. However, moderately risk-averse Florida orange producers would diversify into grapefruit production, if the annual amortized fixed costs were reduced by as little as 10%.


Issue Date:
Jan 25 1989
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/133739
Total Pages:
23
Series Statement:
89-5




 Record created 2017-04-01, last modified 2017-08-22

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