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Incorporating risk in a positive mathematical programming framework: a dual approach

Linda Arata, Michele Donati, Paolo Sckokai () and Filippo Arfini

Australian Journal of Agricultural and Resource Economics, 2017, vol. 61, issue 2

Abstract: In this study we develop a new methodological proposal to incorporate risk into a farm-level positive mathematical programming (PMP) model. We estimate simulta-neously the farm nonlinear cost function and a farmer-specific coefficient of absolute risk aversion as well as the resource shadow prices. The model is applied to a sample of representative arable crop farms from the Emilia-Romagna region in Italy. The estimation results confirm the calibration ability of the model and reveal the values of the individual risk aversion coefficients. We use the model to simulate different scenarios of crop price volatility, in order to explore the potential risk management role of an agri-environmental scheme.

Keywords: Agricultural Finance; Production Economics; Risk and Uncertainty (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aareaj:302929

DOI: 10.22004/ag.econ.302929

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