Abstract
Producers’ decisions, such as crop insurance, contract agreement, and technology adoption, involve considerable risk and uncertainty. Particularly, specialty crop production is more vulnerable to risk and requires more intensive management than commodity crop production, while risk mitigation tools for specialty crop production are comparatively limited. We apply Prospect Theory (PT) to analyze risk preferences of U.S. producers, and further compare the preference differences between commodity crop and specialty crop producers. Reference dependent, diminishing sensitivity, loss aversion, and probability weighting, as well as certain farm characteristics and producer demographics, are found to have a significant impact on grower risk attitudes. In addition, we do not observe significant differences in the base PT estimates between commodity crop and specialty crop producers. However, the relationships between risk behavior and individual characteristics vary between the two types of producers, which shed lights on the development of agricultural policies and provide implications for the design of contract and insurance.
Original language | English |
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Pages (from-to) | 359-372 |
Number of pages | 14 |
Journal | Agricultural Economics (United Kingdom) |
Volume | 51 |
Issue number | 3 |
DOIs | |
State | Published - May 1 2020 |
Bibliographical note
Publisher Copyright:© 2020 International Association of Agricultural Economists
Keywords
- commodity crop
- crop insurance
- prospect theory
- specialty crop
ASJC Scopus subject areas
- Agronomy and Crop Science
- Economics and Econometrics