The cost of agricultural production risk

We examine the relative influence of preferences and technology on producers' ex ante willingness to pay for a reduction in production risk. A risk averse producer pays both an Arrow-Pratt risk premium to stabilize income and a 'production premium' to stabilize yield. Using soil-nitrate risks as our motivating example, we demonstrate that the production premium accounts for 40-85% of producers' willingness to pay for risk reduction. These results demonstrate the relative importance of technology over risk preferences when estimating the costs of agricultural production risk.


Issue Date:
1995-08
Publication Type:
Journal Article
PURL Identifier:
http://purl.umn.edu/173576
Published in:
Agricultural Economics: The Journal of the International Association of Agricultural Economists, Volume 12, Issue 2
Page range:
141-150
Total Pages:
10




 Record created 2017-04-01, last modified 2017-08-27

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