Economic Hysteresis in Variety Selection

Investing in a new perennial crop variety involves an irreversible commitment of capital and generates an uncertain return stream. As a result, the decision to adopt a new variety includes a significant real option value. Waiting for returns to rise above this real option causes a delay in adoption because of economic hysteresis. This study tests for hysteresis in the adoption of wine grape varieties using a sample of district-level data from the state of California. The empirical results show a significant hysteretic effect in wine grape investment, which might be reduced by activities that smooth earnings over time.


Issue Date:
2003-04
Publication Type:
Journal Article
PURL Identifier:
http://purl.umn.edu/37310
Published in:
Journal of Agricultural and Applied Economics, Volume 35, Number 1
Page range:
1-14
Total Pages:
14
JEL Codes:
Q14; Q11; D92; C34




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

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