Abstract
We analyze the coupling effect of expectations about base acreage and yield updating in future farm policy on production decisions in the presence of price, yield, and policy uncertainty for a risk-averse farmer producing a single crop.The farmer receives market revenue and government payments. Using stochastic dynamic programming, optimum decisions under present value calculations positively link current acreage and fertilizer decisions to future government payments through expected updates of base acreage and yield in the future regime.Moving from a zero probability of updating to a probability of one increases optimum acreage and yield by 6.25% and 0.134%, respectively.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 849-858 |
| Number of pages | 10 |
| Journal | American Journal of Agricultural Economics |
| Volume | 92 |
| Issue number | 3 |
| DOIs | |
| State | Published - Apr 2010 |
| Externally published | Yes |
Keywords
- Base acreage
- Decoupled payments
- Expectations
- Program yield
- Updating
ASJC Scopus subject areas
- Agricultural and Biological Sciences (miscellaneous)
- Economics and Econometrics