“…The covariates z i (land quality) are IID from a truncated normal distribution N (200,15 2 ) on the interval [100,300]. The beta distribution for error and the non‐constant scaling factor are included to introduce left skewness in corn yield distributions (Ker and Goodwin, ; Du et al ., ) and increasing yield variation as the historical yield increases (Tannura et al ., ). Based on this yield model, observed premiums are generated from y i = μ ( x i , z i )+ ζ i , where ζ i ∼ N (0,0.1 2 ) are measurement errors, the covariates x i (coverage rates) are IID from a uniform distribution on the discrete numbers (0.55,0.60,…,0.90,0.95) and the true premium price is by equation .…”