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Acreage Decisions Under Risk: The Case of Corn and Soybeans
Author(s) -
Chavas JeanPaul,
Holt Matthew T.
Publication year - 1990
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 - 10.2307/1243021
Subject(s) - economics , commodity , maximization , truncation (statistics) , consumption (sociology) , government (linguistics) , econometrics , agricultural economics , microeconomics , mathematics , statistics , finance , social science , linguistics , philosophy , sociology
An acreage supply response model is developed under expected utility maximization. The resulting framework is used to specify and estimate a system of risk‐responsive acreage equations for corn and soybeans in the United States. Particular attention is given to the truncation effects of government price supports on the distribution of corn and soybean prices. Also, a wealth variable is included in the acreage equations. The empirical results indicate that risk and wealth variables play an important role in corn‐soybean acreage decisions. The analysis also shows that cross‐commodity risk reduction is important in acreage allocation decisions.