IDEAS home Printed from https://ideas.repec.org/p/ags/waeaho/36205.html
   My bibliography  Save this paper

Intertemporal Decisions Of Farmers' Risk Management: A Dynamic Optimization With Generalized Expected Utility

Author

Listed:
  • Du, Wen
  • Wang, H. Holly

Abstract

In this paper we attempt an intertemporal study of risk management decisions for wheat growers in the Pacific Northwest. We apply a generalized expected utility model (GEU) to examine the farmers' optimal choices of hedging ratios and crop insurance coverage levels in the presence of government payment programs in a multi-period production environment. A stochastic trend model is used to identify the long-term time series patterns of annual wheat yields, cash prices, and futures prices from two counties in Washington. The fitted models are then used as the base for yield and price simulation over the next five years. The stochastic dynamic optimization problem is solved numerically based on simulated data. The optimal solutions indicate that the GEU model is feasible in modeling farmers' intertemporal decisions regarding risk management. The comparison between GEU model and some commonly used expected utility models further implies the advantage of the GEU model in being flexible to specify farmers' intertemporal preferences separately and completely.

Suggested Citation

  • Du, Wen & Wang, H. Holly, 2004. "Intertemporal Decisions Of Farmers' Risk Management: A Dynamic Optimization With Generalized Expected Utility," 2004 Annual Meeting, June 30-July 2, 2004, Honolulu, Hawaii 36205, Western Agricultural Economics Association.
    • Handle: RePEc:ags:waeaho:36205
    DOI: 10.22004/ag.econ.36205
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/36205/files/sp04du01.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.36205?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
    ---><---

    Citations

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


    Cited by:

    1. Magreta, Ruth & Magombo, Tennyson & Zingore, Shamie, 2010. "When the Weak Win: Role of Farmer Groups in Influencing Agricultural Policy Outcome; a Case of Nkhate Irrigation Scheme in Malawi," 2010 AAAE Third Conference/AEASA 48th Conference, September 19-23, 2010, Cape Town, South Africa 97043, African Association of Agricultural Economists (AAAE).

    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:ags:waeaho:36205. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/waeaaea.html .

    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.