Abstract

A model of farmer decision making is developed to determine the extent to which uncertainties about soil fertility and weather affect the value of site-specific technologies (SSTs) using jointly estimated risk and technology parameters. Uncertainty can lead risk-averse farmers to apply more fertilizers and generate more pollution than in the certainty case. Ignoring uncertainty and risk aversion would overestimate the economic and environmental benefits of SSTs and underestimate the subsidy required to induce adoption. Accounting for uncertainties and risk preferences might explain the low observed adoption rates of SSTs. Improving the accuracy of SSTs would increase the incentives for adoption.

Original languageEnglish (US)
Pages (from-to)305-317
Number of pages13
JournalAmerican Journal of Agricultural Economics
Volume85
Issue number2
DOIs
StatePublished - May 2003

Keywords

  • Nitrogen runoff
  • Risk preferences
  • Spatial variability
  • Technology adoption
  • Uncertainty

ASJC Scopus subject areas

  • Agricultural and Biological Sciences (miscellaneous)
  • Economics and Econometrics

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