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Adopting Bio-Energy Crops: Does Farmers Attitude toward Loss Matter?

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  • Anand, Mohit
  • Miao, Ruiqing
  • Khanna, Madhu

Abstract

This paper analyzes farmers’ willingness to grow a perennial energy crop (namely, miscanthus) while accounting for their attitude toward loss based on prospect theory. The analysis includes 1,877 U.S. counties east of the 100th Meridian that have data for corn yield and for miscanthus. We first estimate distributions of profits for miscanthus and conventional crops. The average probability of having a loss from growing miscanthus on high and low quality land for each county is calculated. We then study farmers’ optimal land allocation between miscanthus and conventional crops under prospect theory, and separately, under expected utility theory. Results show that all else equal, miscanthus production is lower when farmers’ loss aversion is considered than when loss aversion is ignored. Moreover, geographical configuration of miscanthus adoption predicted by prospect theory significantly differs from that predicted by expected utility theory.

Suggested Citation

  • Anand, Mohit & Miao, Ruiqing & Khanna, Madhu, 2017. "Adopting Bio-Energy Crops: Does Farmers Attitude toward Loss Matter?," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 260825, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea17:260825
    DOI: 10.22004/ag.econ.260825
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    Cited by:

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    2. McCarty, Tanner & Sesmero, Juan, 2021. "Contracting for perennial energy crops and the cost-effectiveness of the Biomass Crop Assistance Program," Energy Policy, Elsevier, vol. 149(C).
    3. Madhu Khanna, 2022. "Breakthroughs at the disciplinary nexus: Rewards and challenges for applied economists," American Journal of Agricultural Economics, John Wiley & Sons, vol. 104(2), pages 475-492, March.
    4. Deepayan Debnath & Madhu Khanna & Deepak Rajagopal & David Zilberman, 2019. "The Future of Biofuels in an Electrifying Global Transportation Sector: Imperative, Prospects and Challenges," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 41(4), pages 563-582, December.
    5. Madhu Khanna & Ruiqing Miao, 2022. "Inducing the adoption of emerging technologies for sustainable intensification of food and renewable energy production: insights from applied economics," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 66(1), pages 1-23, January.
    6. Alexis H. Villacis & Jeffrey R. Alwang & Victor Barrera, 2021. "Linking risk preferences and risk perceptions of climate change: A prospect theory approach," Agricultural Economics, International Association of Agricultural Economists, vol. 52(5), pages 863-877, September.
    7. Burli, Pralhad & Lal, Pankaj & Wolde, Bernabas & Jose, Shibu & Bardhan, Sougata, 2021. "Perceptions about switchgrass and land allocation decisions: Evidence from a farmer survey in Missouri," Land Use Policy, Elsevier, vol. 109(C).
    8. Sant’Anna, Ana Claudia & Bergtold, Jason S. & Shanoyan, Aleksan & Caldas, Marcellus M. & Granco, Gabriel, 2022. "Biofuel feedstock contract attributes, substitutability and tradeoffs in sugarcane production for ethanol in the Brazilian Cerrado: A stated choice approach," Renewable Energy, Elsevier, vol. 185(C), pages 665-679.

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    Keywords

    Crop Production/Industries; Farm Management; Land Economics/Use;
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