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SENSITIVITY OF FARM PLANS UNDER RISK‐AVERSE BEHAVIOUR: A NOTE ON THE ENVIRONMENTAL IMPLICATIONS
Author(s) -
Oglethorpe David R.
Publication year - 1995
Publication title -
journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.157
H-Index - 61
eISSN - 1477-9552
pISSN - 0021-857X
DOI - 10.1111/j.1477-9552.1995.tb00768.x
Subject(s) - economics , minor (academic) , agriculture , risk aversion (psychology) , expected utility hypothesis , sensitivity (control systems) , outcome (game theory) , agricultural economics , microeconomics , financial economics , ecology , electronic engineering , political science , law , engineering , biology
This study demonstrates that the intensity of farm‐level land use can be extremely sensitive to minor reductions in expected farm income when the risk‐averse farmer makes utility maximising decisions. The study uses directly elicited utility functions for farmers in the North of England in conjunction with MOTAD generated E, V frontiers. The results imply that instability encourages the use of less intensive farming methods and therefore could actually assist the achievement of environmental policy goals.