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A Financial-Economic von Thünen Model

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  • R G Cromley
  • D M Hanink

Abstract

The von Thünen model of agricultural land use is reformulated in this paper as an investment decision in which the objectives of farmers range from total risk-aversion to profit-maximization. By means of a variant of the mean-variance model of contemporary portfolio theory, it is demonstrated that individual bid-rent functions depend on the nature of a farmer's utility function. Because farmers' objectives affect their bid-rent functions, the spatial pattern of agricultural production is also affected. The conventional result of the von Thünen model is shown to be a special case of the more general portfolio model.

Suggested Citation

  • R G Cromley & D M Hanink, 1989. "A Financial-Economic von Thünen Model," Environment and Planning A, , vol. 21(7), pages 951-960, July.
    • Handle: RePEc:sae:envira:v:21:y:1989:i:7:p:951-960
    DOI: 10.1068/a210951
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