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PR - Disinvestment Behaviour Of Agricultural Entrepreneurs: Experimental Results (p380-387)

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  • Maart, Syster Christin
  • Mußhoff, Oliver
  • Odening, Martin
  • Sandri, Serena
  • Schade, Christian

Abstract

Agrarian structures are often characterized by some kind of economic inertia. It is particularly puzzling why unprofitable farms persist over time instead of being sold. In this paper we analyze the exit decision of farmers using the real options approach. The validity of the real options theory is assessed by means of laboratory experiments. Our results show that real options models are able to predict actual disinvestment decisions better than traditional investment theory. Nevertheless, the observed disinvestment reluctance was even more pronounced as predicted by real options theory.

Suggested Citation

  • Maart, Syster Christin & Mußhoff, Oliver & Odening, Martin & Sandri, Serena & Schade, Christian, 2011. "PR - Disinvestment Behaviour Of Agricultural Entrepreneurs: Experimental Results (p380-387)," 18th Congress, Methven, New Zealand, 2011 345580, International Farm Management Association.
    • Handle: RePEc:ags:ifma11:345580
    DOI: 10.22004/ag.econ.345580
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    References listed on IDEAS

    as
    1. Jan Hinrichs & Oliver Musshoff & Martin Odening, 2008. "Economic hysteresis in hog production," Applied Economics, Taylor & Francis Journals, vol. 40(3), pages 333-340.
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    7. Turvey, Calum G., 2002. "Can Hysteresis And Real Options Explain The Farmland Valuation Puzzle?," Working Papers 34131, University of Guelph, Department of Food, Agricultural and Resource Economics.
    8. Richards, Timothy J. & Green, Gareth P., 2003. "Economic Hysteresis in Variety Selection," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 35(1), pages 1-14, April.
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