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Tactical Opportunities, Risk Attitude and Choice of Farming Strategy: an Application of the Distribution Method

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  • Marshall, Graham R.
  • Jones, Randall E.
  • Wall, Lisa M.

Abstract

When assessing farming strategies, it is important to account for the opportunities provided for tactically adjusting to outcomes of risk. The hypothesis that accounting for tactical adjustment is more important than accounting for risk attitude was supported in this study with regard to identifying the optimal drainage recirculation strategy for an irrigated dairy farm. Failing to account for tactical adjustment would lead to a sub‐optimal choice, costing the farmer about A$3 100 in present value terms. In contrast, failing to account for risk aversion would not affect the strategy chosen. The distribution method was found to be well suited to modelling tactical adjustment.

Suggested Citation

  • Marshall, Graham R. & Jones, Randall E. & Wall, Lisa M., 1997. "Tactical Opportunities, Risk Attitude and Choice of Farming Strategy: an Application of the Distribution Method," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 41(4), pages 1-21.
    • Handle: RePEc:ags:aareaj:118064
    DOI: 10.22004/ag.econ.118064
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    2. Jill Windle & John Rolfe, 2005. "Diversification choices in agriculture: a Choice Modelling case study of sugarcane growers," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 49(1), pages 63-74, March.
    3. Windle, Jill & Rolfe, John, 2005. "Diversification choices in agriculture: a Choice Modelling case study of sugarcane growers," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 49(1), pages 1-12.
    4. Marshall, Graham R., 2000. "Voluntary Cooperation in the Commons? Evidence from a Survey of Farmers in the Murray Region's Land and Water Management Planning Districts," 2000 Conference (44th), January 23-25, 2000, Sydney, Australia 123703, Australian Agricultural and Resource Economics Society.
    5. Murray-Prior, Roy B. & Wright, Vic, 2001. "Influence of strategies and heuristics on farmers’ response to change under uncertainty," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 45(4), pages 1-26.
    6. Gicheha, M.G. & Edwards, G.R. & Bell, S.T. & Burtt, E.S. & Bywater, A.C., 2014. "Embedded risk management in dryland sheep systems II. Risk analysis," Agricultural Systems, Elsevier, vol. 124(C), pages 1-11.
    7. Behrendt, Karl & Cacho, Oscar & Scott, James M. & Jones, Randall, 2016. "Using seasonal stochastic dynamic programming to identify optimal management decisions that achieve maximum economic sustainable yields from grasslands under climate risk," Agricultural Systems, Elsevier, vol. 145(C), pages 13-23.

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