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The impact of water price uncertainty on the adoption of precision irrigation systems

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  • Karina Schoengold
  • David L. Sunding

Abstract

We examine whether a firm is more or less likely to adopt precision technology when input prices are stochastic. The results are important to determining whether programs and contracts that reduce input price uncertainty may deter the adoption of conservation practices. An economic model of the technology adoption decision shows that the net effect of input price risk is ambiguous and depends on several factors including the shutdown effect, the mean price effect, the precision expansion effect, and the risk aversion effect. An empirical implementation of the model relies on data on water price and irrigation technology adoption observed in a California irrigation district over the period 1999–2002. The results show that a stable input price increases the adoption of precision technology, but the impact depends on crop choice and land quality characteristics.

Suggested Citation

  • Karina Schoengold & David L. Sunding, 2014. "The impact of water price uncertainty on the adoption of precision irrigation systems," Agricultural Economics, International Association of Agricultural Economists, vol. 45(6), pages 729-743, November.
    • Handle: RePEc:bla:agecon:v:45:y:2014:i:6:p:729-743
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    File URL: http://hdl.handle.net/10.1111/agec.12118
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    2. Rosene, Robert & Kovacs, Kent F., 2018. "Factors influencing the adoption of irrigation measurement tools in the Arkansas Delta," 2018 Annual Meeting, February 2-6, 2018, Jacksonville, Florida 266445, Southern Agricultural Economics Association.
    3. Xie, Yang & Zilberman, David, 2015. "Water-Storage Capacities versus Water-Use Efficiency: Substitutes or Complements?," 2015 Conference, August 9-14, 2015, Milan, Italy 211894, International Association of Agricultural Economists.
    4. Linjing Ren & Xiaojun Yang, 2023. "Adoption and shift of water-saving strategies to policy shock: based on social-ecological system analysis," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 37(10), pages 4015-4037, August.
    5. Elizabeth Canales & Jason S. Bergtold & Jeffery R. Williams, 2020. "Conservation practice complementarity and timing of on‐farm adoption," Agricultural Economics, International Association of Agricultural Economists, vol. 51(5), pages 777-792, September.
    6. Zhang, Jie & Campana, Pietro Elia & Yao, Tian & Zhang, Yang & Lundblad, Anders & Melton, Forrest & Yan, Jinyue, 2018. "The water-food-energy nexus optimization approach to combat agricultural drought: a case study in the United States," Applied Energy, Elsevier, vol. 227(C), pages 449-464.

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