An Empirical Test of Utility vs. Profit Maximization in Agricultural Production

Lin, William T.; Dean, GJ; Moore, Carl V.

doi:10.2307/1238602

Cited by 209 publications

(79 citation statements)

References 11 publications

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“…Experiments and hypothetical alternatives are usually used to determine risk aversion using this method. This approach was used by Offi cer and Halter (1968), Lin et al (1974), Webster and Kennedy (1975), Dillon and Scandizzo (1978), Halter and Mason (1978), Young (1979) and Collins et al (1991). The second approach stands on a position that risk aversion is a latent feature and can be observed only indirectly (for example through observing farmers' investment activities).…”

Section: Risk Perception and Risk Aversion Among Farmersmentioning

confidence: 99%

Farmers’ risk perception, risk aversion and strategies to cope with production risk: an empirical study from Poland

Sulewski¹,

Kłoczko-Gajewska²

2014

stagec

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Agriculture is an activity burdened with multiple risk factors, some of which are related to the biological nature of production. Climate change, liberalisation of international agricultural trade and changes in the agricultural support system mean that the importance of risk in agriculture will increase. This means that increasing attention will be given to risk management at the farm level, although implementation of the appropriate risk management strategy is connected to farmers' perception of, and aversion to, risk. This study, which integrates these three aspects of risk in agriculture, is based on data collected from almost 600 participant farms from the Polish FADN system. It was shown that drought is perceived by farmers as the main factor of risk in production in Poland. Polish farmers are rather risk averse, but a little more in terms of their personal health and less in the case of the farm. The analysis showed that the following factors increased the level of risk aversion of Polish farmers: debt ratio, losses in production in previous years, soil quality and concentration on fi nancial independence as a hierarchy of priorities. The most important risk-coping strategy was crop insurance. Knowledge of farmers' perception of risk, risk aversion and preferred risk management strategies is essential for creating policy instruments to support agricultural risk management, and for the development of training programmes tailored to the needs of farmers.

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Section: Risk Perception and Risk Aversion Among Farmersmentioning

confidence: 99%

Farmers’ risk perception, risk aversion and strategies to cope with production risk: an empirical study from Poland

Sulewski¹,

Kłoczko-Gajewska²

2014

stagec

View full text Add to dashboard Cite

show abstract

“…The results indicated that the Ramsey model was superior to the Von NeumannMorgenstern models. Lin, Dean and Moore (1974) provided an empirical test for utility vs. profit maximization in agricultural production in California. Utility and profit maximization crops and plans were determined for six large California farms.…”

Section: Independencementioning

confidence: 99%

Attitudes of Vegetable Farmers towards Risk in the Jordan Valley

Hindi

2009

Emir. J. Food Agric

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Abstract:The main objective of this study was to examine the vegetable farmers' attitudes towards risk in the Jordan Valley. In order to measure risk attitudes, utility functions for vegetable farmers in the Jordan Valley were estimated by using the Von NeumannMorgenstern model. From the estimated utility functions, the risk attitudes coefficient for each farmer was measured. Of the total random sample of 200 farmers from the middle Ghor in the Jordan Valley, a purpose sample of 50 vegetable farmers was proportionally selected, i.e. 13 farmers (26%), 15 farmers (30%), and 22 farmers (44%) fell into the risk avert, risk neutral and risk taker categories, respectively. To analyze the relationship between farmers' personal characteristics such as age, education, farm size, family size, experience in agriculture and their risk attitudes, a multiple linear regression model was used. Linear, semi-log, and double-log equations were used. Of these, the semi-log equation proved the best. The regression results of the study indicated that the coefficient of farm size (X3) and the coefficient of family size (X5) were statistically significant at the 5% level of significance.

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“…The suggestion of the Lin et al [1974] study and of earlier studies [officer and Halter, 1968;Dillon and Anderson, 1971;and Massell and Johnson, 1968] is that farm decision makers act as utility maximizers rather than profit maximizers. Utility can be defined as a function of "returns" and "risks"; more specifically, a function of expected returns such that U = F(R, a^) (3.1) and…”

Section: Specification Of the Objective Functionmentioning

confidence: 99%

“…In a study of six large California farms, Lin et [1974] concluded that farmer behavior is more accurately explained by utility maximization (specifically, Bemoullian utility) than by profit maximization. Using the chi-square goodness-of-fit criterion as their measure, the authors showed that the Bemoullian utility formulation provided the most accurate prediction of actual cropping patterns among the six farms included in the study.^ Their hypothesis was that farmer attitude toward risk is the factor which contributes most to the discrepancy between actual optimizing behavior and that predicted by profit maximizing ^The chi-square goodness-of-fit test compares the postulated probability distribution with that suggested by the data to determine whether they are, in fact, the same.…”

Section: Specification Of the Objective Functionmentioning

confidence: 99%

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The impact of financial constraints on the local price of farm land

Fiske

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An Empirical Test of Utility vs. Profit Maximization in Agricultural Production

Cited by 209 publications

References 11 publications

Farmers’ risk perception, risk aversion and strategies to cope with production risk: an empirical study from Poland

Farmers’ risk perception, risk aversion and strategies to cope with production risk: an empirical study from Poland

Attitudes of Vegetable Farmers towards Risk in the Jordan Valley

The impact of financial constraints on the local price of farm land

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