Producers' complex risk management choices

Joost M.E. Pennings, Olga Isengildina-Massa, Scott H. Irwin, Philip Garcia, Darrel L. Good

Research output: Contribution to journalArticlepeer-review

Abstract

Producers have a wide variety of risk management instruments available, making their choice(s) complex. The way producers deal with this complexity can vary and may influence the impact that the determinants, such as risk aversion, have on their choices. A recently developed choice bracketing framework recognizes that producers are unable to evaluate all alternatives simultaneously and that to manage a complex task, they often group or bracket individual alternatives and their consequences together in choice sets. Data on 1,105 U.S. producers show that producers do not use all available combinations of risk management tools and that the influence of the determinants of producer's risk management decisions are not necessarily the same across risk management strategies within and across bracketing levels. The findings may help resolve puzzling results on the role that well-known determinants of risk management behavior have on producers' choices, extending knowledge on producers' risk management behavior. Further, the findings have managerial implications for policy makers and agribusiness companies that provide risk management services.

Original languageEnglish (US)
Pages (from-to)31-54
Number of pages24
JournalAgribusiness
Volume24
Issue number1
DOIs
StatePublished - 2008

ASJC Scopus subject areas

  • Food Science
  • Geography, Planning and Development
  • Animal Science and Zoology
  • Agronomy and Crop Science
  • Economics and Econometrics

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