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Land Allocation under Uncertainty for Alternative Specifications of Return Distributions
Author(s) -
Collender Robert N.,
Zilberman David
Publication year - 1985
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.2307/1241817
Subject(s) - moment (physics) , distribution (mathematics) , decision maker , function (biology) , set (abstract data type) , element (criminal law) , econometrics , decision rule , mathematical economics , economics , mathematical optimization , mathematics , computer science , operations research , microeconomics , mathematical analysis , physics , classical mechanics , evolutionary biology , political science , law , biology , programming language
Using the expected utility‐moment‐generating function approach, a land allocation rule is derived which is both independent of the nature of the underlying distribution of each element in the choice set and accounts for all moments of that distribution. This decision rule is applied to the choice between cotton and corn in the Mississippi Delta to demonstrate that consideration of just the first two moments of the distribution can often be unjustified and damaging empirically, theoretically, and in terms of the utility of the decision maker.