Area allocation under price uncertainty on Dutch arable farms

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Abstract

This paper uses a Mean-Variance utility function to build a dual model that simultaneously determines area allocation and production/input levels under output price uncertainty. Regularity conditions of the indirect utility function (convexity) and producers risk preferences are tested. The framework is applied to a rotating sample of Dutch arable farms. Dutch arable farms are found to be risk averse, with the size of the risk premium given by 3 per cent of annual profit. A bootstrap resampling method shows that curvature conditions are rejected. Price elasticities are compared for an unrestricted model and for a model with curvature conditions being imposed.
Original languageEnglish
Pages (from-to)93-105
JournalJournal of Agricultural Economics
Volume50
Issue number1
Publication statusPublished - 1999

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