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Estimation Risk in Farm Planning Under Uncertainty

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  • Robert N. Collender

Abstract

This paper examines the impact of estimation risk on a decision maker's ability to distinguish between the mean-variance characteristics of different farm plans. The importance of making such distinctions should be clear; risk-averse decision makers will want to bear risk only if they can be reasonably confident of commensurate increases in expected return. When parameters are unknown, statistically testing for differences in their estimated values is appropriate. An illustration of such tests using data from Hazell suggests considerable resources must be devoted toward data generation if normative statements under uncertainty are to be reliable.

Suggested Citation

  • Robert N. Collender, 1989. "Estimation Risk in Farm Planning Under Uncertainty," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 71(4), pages 996-1002.
    • Handle: RePEc:oup:ajagec:v:71:y:1989:i:4:p:996-1002.
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    File URL: http://hdl.handle.net/10.2307/1242675
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    Cited by:

    1. Sergio H. Lence & Dermot J. Hayes, 1994. "The Empirical Minimum-Variance Hedge," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 76(1), pages 94-104.
    2. Wang, Xuecai & Dorfman, Jeffrey H. & McKissick, John & Turner, Steven C., 2001. "Optimal Marketing Decisions for Feeder Cattle under Price and Production Risk," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 33(3), pages 431-443, December.
    3. Lence, Sergio H. & Hayes, Dermot J., 1995. "Land Allocation In The Presence Of Estimation Risk," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 20(1), pages 1-15, July.
    4. Joao Martines-Filho, 2006. "The Performance of Agricultural Market Advisory Services in Corn and Soybeans," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(1), pages 162-181.
    5. Gudbrand Lien & J. Hardaker & Marcel Asseldonk & James Richardson, 2011. "Risk programming analysis with imperfect information," Annals of Operations Research, Springer, vol. 190(1), pages 311-323, October.
    6. Lien, Gudbrand & Hardaker, J. Brian & Asseldonk, Marcel A.P.M. van & Richardson, James W., 2009. "Risk programming and sparse data: how to get more reliable results," Agricultural Systems, Elsevier, vol. 101(1-2), pages 42-48, June.
    7. Marius Rădulescu & Constanta Rădulescu & Gheorghiţă Zbăganu, 2014. "A portfolio theory approach to crop planning under environmental constraints," Annals of Operations Research, Springer, vol. 219(1), pages 243-264, August.
    8. Good, Darrel L. & Martines-Filho, Joao Gomes & Irwin, Scott H., 2002. "The Pricing Performance Of Market Advisory Services In Corn And Soybeans Over 1995-2000," AgMAS Project Research Reports 14784, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics.
    9. Good, Darrel L. & Irwin, Scott H. & Martines-Filho, Joao Gomes & Hagedorn, Lewis A., 2005. "The Pricing Performance of Market Advisory Services in Corn and Soybeans over 1995-2003," AgMAS Project Research Reports 14775, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics.

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