Reoptimization or Bias? Factors Affecting Changes in Production Decisions of Farmers

Joshua Woodard, Leslie Verteramo Chiu, Dmitry Vedenov, Steven Klose and Gabriel Power

No 205735, 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California from Agricultural and Applied Economics Association

Abstract: The decisions of managers aim to maximize profit. In agriculture, depending on the crop, production plans can have a horizon between a few months and several years. However, it is not always the case that managers follow their production plans once they have been established. This is because the information set available to the manager may change over time. The new information may be significant enough as to reconsider the original plan. The reassessment of the production plan depends mainly on the effect that new information has on expected profit, risk perceptions, and risk attitudes. Accordingly, this paper analyzes the variables that contribute to the manager’s decision to update his or her production plan. In particular, we evaluate the effects of managers’ behavioral attributes, farm financial indicators, and production characteristics, on the decision to revise their initial production plans. Our findings provide new insights into the decision-making process of farm and ranch managers, including their expected behavior under different market conditions as well as information processing methods.

Keywords: Agribusiness; Institutional and Behavioral Economics; Risk and Uncertainty (search for similar items in EconPapers)
Pages: 2
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea15:205735

DOI: 10.22004/ag.econ.205735

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