IDEAS home Printed from https://ideas.repec.org/a/eee/jfpoli/v44y2014icp218-226.html
   My bibliography  Save this article

The case for a real options approach to ex-ante cost-benefit analyses of agricultural research projects

Author

Listed:
  • Andoseh, Stephen
  • Bahn, Rachel
  • Gu, Jenny

Abstract

The United States Agency for International Development (USAID), like many other development agencies and donors, increasingly emphasizes evidence-based programming. This requires assessments of project performance at all stages of implementation, comprising ex-ante impact assessment, monitoring and evaluation, and ex-post attribution of outcomes. Ex-ante impact assessment, in particular, involves performing Cost-Benefit Analysis (CBA) to determine the Expected Net Present Value (ENPV) of the project in question. Unfortunately, the traditional ENPV approach has proven inadequate for dealing with uncertainty in the timing of investments and flexibility in future decision making. This is especially relevant for Research and Development (R&D) projects which require several stages of product development and multiple rounds of testing prior to releasing final products. As a consequence, the real-options approach to CBA has increasingly been used to evaluate private sector R&D projects. This paper advocates for the adoption of the real options approach in the evaluation of public investments in agricultural research, and illustrates its practical utility with an assessment conducted by USAID to determine the economic viability of a proposed project to develop improved varieties of critical food security crops in Uganda.

Suggested Citation

  • Andoseh, Stephen & Bahn, Rachel & Gu, Jenny, 2014. "The case for a real options approach to ex-ante cost-benefit analyses of agricultural research projects," Food Policy, Elsevier, vol. 44(C), pages 218-226.
    • Handle: RePEc:eee:jfpoli:v:44:y:2014:i:c:p:218-226
    DOI: 10.1016/j.foodpol.2013.09.016
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0306919213001449
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.foodpol.2013.09.016?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Oliver Musshoff & Norbert Hirschauer, 2008. "Adoption of organic farming in Germany and Austria: an integrative dynamic investment perspective," Agricultural Economics, International Association of Agricultural Economists, vol. 39(1), pages 135-145, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kim, Amy M. & Li, Huanan, 2020. "Incorporating the impacts of climate change in transportation infrastructure decision models," Transportation Research Part A: Policy and Practice, Elsevier, vol. 134(C), pages 271-287.
    2. Cave, Jonathan & Gibson, Stephen, 2023. "Primary and secondary legislation – assessing the impacts of rules for making rules," The Warwick Economics Research Paper Series (TWERPS) 1486, University of Warwick, Department of Economics.
    3. Genowefa Blundo-Canto & Gonzalo Rodríguez-Borray & Ángela-Rocío Vásquez-Urriago & María-Margarita Ramírez-Gómez & Gregorio Zambrano-Moreno & Leidy Tibaduiza-Castañeda & Bellanid Huertas-Carranza & Adr, 2023. "Impact Weaving: An Approach to Strengthening the Plausibility of Anticipated AR4D Impact Pathways," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 35(2), pages 402-425, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mzoughi, Naoufel, 2011. "Farmers adoption of integrated crop protection and organic farming: Do moral and social concerns matter?," Ecological Economics, Elsevier, vol. 70(8), pages 1536-1545, June.
    2. Wollni, Meike & Andersson, Camilla, 2014. "Spatial patterns of organic agriculture adoption: Evidence from Honduras," Ecological Economics, Elsevier, vol. 97(C), pages 120-128.
    3. Verburg, René W. & Verberne, Emma & Negro, Simona O., 2022. "Accelerating the transition towards sustainable agriculture: The case of organic dairy farming in the Netherlands," Agricultural Systems, Elsevier, vol. 198(C).
    4. Ismail Moumouni & Mohamed N. Baco & Latifou Idrissou, 2019. "Towards a Re-Conceptualization of the Pathway of Agricultural Technology for a Better Impact Assessment," International Journal of Publication and Social Studies, Asian Economic and Social Society, vol. 4(2), pages 123-131, June.
    5. Ihli, Hanna Julia & Maart, Syster Christin & Musshoff, Oliver, 2012. "Investment and Disinvestment in Irrigation Technology – An Experimental Analysis of Farmers’ Decision Behavior –," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124532, Agricultural and Applied Economics Association.
    6. Anna Szeląg-Sikora & Jakub Sikora & Marcin Niemiec & Zofia Gródek-Szostak & Joanna Kapusta-Duch & Maciej Kuboń & Monika Komorowska & Joanna Karcz, 2019. "Impact of Integrated and Conventional Plant Production on Selected Soil Parameters in Carrot Production," Sustainability, MDPI, vol. 11(20), pages 1-13, October.
    7. Tzouramani, Irene & Sintori, Alexandra & Liontakis, Angelos E. & Alexopoulos, George, 2010. "Assessing agricultural policy incentives for Greek organic agriculture: A Real options approach," 114th Seminar, April 15-16, 2010, Berlin, Germany 61096, European Association of Agricultural Economists.
    8. Hanna J. Ihli & Syster C. Maart-Noelck & Oliver Musshoff, 2014. "Does timing matter? A real options experiment to farmers' investment and disinvestment behaviours," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 58(3), pages 430-452, July.
    9. Rees, Charles & Grovermann, Christian & Finger, Robert, 2023. "National organic action plans and organic farmland area growth in Europe," Food Policy, Elsevier, vol. 121(C).
    10. Delbridge, Timothy A. & Connolly, Cristina, 2017. "The Neighbor Effect: The Nature of Spatial Externalities in the Decision to Adopt Organic Production Systems," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258358, Agricultural and Applied Economics Association.
    11. Sergei Schaub & Jaboury Ghazoul & Robert Huber & Wei Zhang & Adelaide Sander & Charles Rees & Simanti Banerjee & Robert Finger, 2023. "The role of behavioural factors and opportunity costs in farmers' participation in voluntary agri‐environmental schemes: A systematic review," Journal of Agricultural Economics, Wiley Blackwell, vol. 74(3), pages 617-660, September.
    12. Adrián Csordás & István Füzesi, 2023. "The Impact of Technophobia on Vertical Farms," Sustainability, MDPI, vol. 15(9), pages 1-17, May.
    13. Lakner, Sebastian, 2009. "Technical efficiency of organic milk-farms in Germany - the role of subsidies and of regional factors," 2009 Conference, August 16-22, 2009, Beijing, China 51301, International Association of Agricultural Economists.
    14. Schmidtner, Eva & Lippert, Christian & Dabbert, Stephan, 2015. "Does Spatial Dependence Depend on Spatial Resolution? – An Empirical Analysis of Organic Farming in Southern Germany," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 64(03), September.
    15. Ihli, Hanna Julia & Musshoff, Oliver, 2013. "Understanding the Investment Behavior of Ugandan Smallholder Farmers: An Experimental Analysis," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150331, Agricultural and Applied Economics Association.
    16. Musshoff, Oliver & Hirschauer, Norbert, 2008. "Investment planning under uncertainty and flexibility: the case of a purchasable sales contract," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 52(1), pages 1-20.
    17. Fritz Wittmann & Michael Eder, 2023. "Farmers facing changed urban dietary patterns: whether and what to adapt?," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 28(7), pages 1-26, October.
    18. Heyder, Matthias & Theuvsen, Ludwig & Hollmann-Hespos, Thorsten, 2012. "Investments in tracking and tracing systems in the food industry: A PLS analysis," Food Policy, Elsevier, vol. 37(1), pages 102-113.
    19. Mzoughi, Naoufel, 2014. "Do organic farmers feel happier than conventional ones? An exploratory analysis," Ecological Economics, Elsevier, vol. 103(C), pages 38-43.
    20. Laepple, Doris & Kelley, Hugh, 2014. "Spatial dependence in the adoption of organic drystock farming in Ireland," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182759, European Association of Agricultural Economists.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jfpoli:v:44:y:2014:i:c:p:218-226. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/foodpol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.