Agricultural investors valuing sequences of monetary rewards – results of an experiment

Martin Philipp Steinhorst and Enno Bahrs

Agricultural Finance Review, 2014, vol. 74, issue 3, 379-396

Abstract: Purpose - – The purpose of this paper is to quantify the differences between the classical normative investment theory and alternative investment models of agricultural stakeholders’ choices. Design/methodology/approach - – Farmers (n=1,024) and agricultural commodity traders (n=509) were asked to rank investment alternatives. Non-linear regressions were integrated into a Monotonic Analysis of Variance algorithm to analyze the investment rankings. The results reveal coefficients for classical constant discounting, hyperbolic discounting and a preference for a sequence model. Two information criteria indicate the models’ goodness of fit and allow a comparison of the investment rankings of different age groups. Findings - – Agribusiness stakeholders have preferences for sequences and could be willing to accept lower internal rates of return for monotone-distributed rewards. Practical implications - – The results are useful for state-aided agricultural investment policies and contractual relations within agribusiness. Originality/value - – To the author's knowledge, this paper is the first paper to analyze agricultural stakeholders’ preferences for sequences.

Keywords: Discounted utility; Hyperbolic discounting; Investment behavior; Preference for sequences (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:eme:afrpps:v:74:y:2014:i:3:p:379-396

DOI: 10.1108/AFR-06-2013-0026

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