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Valuing Information When Risk Preferences Are Nonneutral: An Application to Irrigation Scheduling

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  • Darrell J. Bosch
  • Vernon R. Eidman

Abstract

A method for valuing information when risk attitudes are nonneutral is presented. The procedure uses simulation and generalized stochastic dominance to value information by level of risk aversion. The value of soil water and weather information to irrigators is quantified to illustrate the procedure. The empirical results show that additional information has diminishing marginal returns for a given level of risk aversion and that the value of information increases with the level of risk aversion. The application demonstrates the importance of valuing information on a whole-firm basis when returns to information are related to returns of other firm enterprises and risk preferences are nonneutral.

Suggested Citation

  • Darrell J. Bosch & Vernon R. Eidman, 1987. "Valuing Information When Risk Preferences Are Nonneutral: An Application to Irrigation Scheduling," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 69(3), pages 658-668.
    • Handle: RePEc:oup:ajagec:v:69:y:1987:i:3:p:658-668.
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    Citations

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    1. Fackler, Paul L. & King, Robert P., 1988. "Generation of Dependent Random Variates with Given Marginal Distributions and Fractile Correlation Structure," 1988 Annual Meeting, August 1-3, Knoxville, Tennessee 270406, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. Swinton, Scott M. & King, Robert P., 1990. "Weedsim: A Bioeconomic Model Of Weed Management In Corn," Staff Papers 14164, University of Minnesota, Department of Applied Economics.
    3. Eidman, V., 1989. "Quantifying and managing risk in agriculture," 1989 Annual Conference, September 25-27, Bloemfontein, South Africa 314723, Agricultural Economics Association of South Africa (AEASA).
    4. Becker, N., 1999. "A comparative analysis of water price support versus drought compensation scheme," Agricultural Economics, Blackwell, vol. 21(1), pages 81-92, August.
    5. Cohen, Daniel R. & Zilberman, David, 1997. "Actual Versus Stated Willingness To Pay: A Comment," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 22(2), pages 1-6, December.
    6. Regmi, Anita, 1990. "The value of information in integrated pest management of corn rootworm and European corn borer in Minnesota," Faculty and Alumni Dissertations 307267, University of Minnesota, Department of Applied Economics.
    7. Roach, Brian A. & Hamlett, Cathy A., 1991. "Dairy Farmer's Valuation of Decreased Market Risk Offered by Cooperatives," 1991 Annual Meeting, August 4-7, Manhattan, Kansas 271240, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    8. Botes, J. H. F. & Bosch, D. J. & Oosthuizen, L. K., 1996. "A simulation and optimization approach for evaluating irrigation information," Agricultural Systems, Elsevier, vol. 51(2), pages 165-183, June.
    9. Bosch, Darrell J. & Lee, Katherine L., 1988. "The Farm Level Effects of Better Access to Information: The Case of Dart," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 20(2), pages 109-118, December.
    10. Mjelde, James W. & Cochran, Mark J., 1988. "Obtaining Lower And Upper Bounds On The Value Of Seasonal Climate Forecasts As A Function Of Risk Preferences," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 13(2), pages 1-9, December.
    11. Scott M. Swinton & Robert P. King, 1994. "The Value of Pest Information in a Dynamic Setting: The Case of Weed Control," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 76(1), pages 36-46.
    12. Roach, Brian A. & Hamlett, Cathy A., 1991. "Dairy Farmer's Valuation of Market Security Offered by Milk Marketing Cooperatives," Staff Paper Series 256842, Pennsylvania State University, Department of Agricultural Economics and Rural Sociology.
    13. Douglas D. Parker & David Zilberman, 1996. "The use of information services: The case of CIMIS," Agribusiness, John Wiley & Sons, Ltd., vol. 12(3), pages 209-218.
    14. Lukin, Vladimir & Epplin, Francis M., 1999. "Value Of Soil Test Information For Crop Production," 1999 Annual meeting, August 8-11, Nashville, TN 21586, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    15. Galioto, F., 2018. "The value of information for the management of water resources in agriculture: comparing the economic impact of alternative sources of information to schedule irrigation," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277384, International Association of Agricultural Economists.
    16. Goh, Siew & Shih, Chao-Chyuan & Cochran, Mark J. & Raskin, Rob, 1989. "A Generalized Stochastic Dominance Program For The Ibm Pc," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 21(2), pages 1-8, December.
    17. Jonathan R. McFadden & Alicia Rosburg & Eric Njuki, 2022. "Information inputs and technical efficiency in midwest corn production: evidence from farmers' use of yield and soil maps," American Journal of Agricultural Economics, John Wiley & Sons, vol. 104(2), pages 589-612, March.
    18. Oriade, Caleb A. & Dillon, Carl R., 1997. "Developments in biophysical and bioeconomic simulation of agricultural systems: a review," Agricultural Economics, Blackwell, vol. 17(1), pages 45-58, October.
    19. Reynaud, Arnaud, 2009. "Adaptation à court et à long terme de l'agriculture au risque de sécheresse : une approche par couplage de modèles biophysiques et économiques," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement (RAEStud), Institut National de la Recherche Agronomique (INRA), vol. 90(2).
    20. Larson, James A. & Mapp, Harry P., Jr., 1997. "Cotton Cultivar, Planting, Irrigating, And Harvesting Decisions Under Risk," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 22(1), pages 1-17, July.
    21. Larson, James A. & Mapp, Harry P., 1992. "With Apologies to Shakespeare: To Plant or Not to Plant, That is the Question," WAEA/ WFEA Conference Archive (1929-1995) 321339, Western Agricultural Economics Association.
    22. Arnaud Reynaud, 2009. "Adaptation à court et à long terme de l'agriculture au risque de sécheresse : une approche par couplage de modèles biophysiques et économiques," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement, INRA Department of Economics, vol. 90(2), pages 121-154.

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