Information Value and Risk Premium in Agricultural Production: The Case of Split Nitrogen Application for Corn

12 Pages Posted: 24 Mar 2020

See all articles by Philippe Bontems

Philippe Bontems

French National Institute for Agricultural Research (INRA)

Alban Thomas

University of Toulouse 1 - Toulouse School of Economics (TSE); delete

Date Written: February 2000

Abstract

This article considers an agricultural production model of sequential nitrogen application under risk. Because of random shocks between subsequent production stages, optimal fertilization decisions depend on the magnitude of farmers' risk aversion (risk premium), and the possibility for farmers to process information (value of information). We propose a joint estimation procedure of technology and risk aversion parameters, using a structural, simulation‐based econometric procedure. Parameter estimates allow to compute both the value of information and the risk premium, which account for about 30% of fertilizer cost for Midwest corn producers.

Keywords: agricultural production, generalized method‐of‐moments estimation, information value, production risk, risk aversion, Q120

Suggested Citation

Bontems, Philippe and Thomas, Alban and Thomas, Alban, Information Value and Risk Premium in Agricultural Production: The Case of Split Nitrogen Application for Corn (February 2000). American Journal of Agricultural Economics, Vol. 82, Issue 1, pp. 59-70, 2000, Available at SSRN: https://ssrn.com/abstract=3557423 or http://dx.doi.org/10.1111/0002-9092.00006

Philippe Bontems (Contact Author)

French National Institute for Agricultural Research (INRA)

147, rue de l'Universite
Paris Cedex 07, 78-Yvelines 75338
France

Alban Thomas

delete

University of Toulouse 1 - Toulouse School of Economics (TSE) ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France

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