Producers' complex risk management choices

Joost Pennings (), Olga Isengildina-Massa, Scott Irwin, Philip Garcia and Darrel L. Good
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Olga Isengildina-Massa: Department of Applied Economics and Statistics, Clemson University, 295 Barre Hall, Box 340313, Clemson, SC 29634-0313, Postal: Department of Applied Economics and Statistics, Clemson University, 295 Barre Hall, Box 340313, Clemson, SC 29634-0313
Darrel L. Good: Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, 326 Mumford Hall, MC-710, 1301 West Gregory Drive, Urbana, Illinois 61801, Postal: Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, 326 Mumford Hall, MC-710, 1301 West Gregory Drive, Urbana, Illinois 61801
Authors registered in the RePEc Author Service: Olga Isengildina Massa and Johannes M. Pennings

Agribusiness, 2008, vol. 24, issue 1, 31-54

Abstract: Producers have a wide variety of risk management instruments available, making their choice(s) complex. The way producers deal with this complexity can vary and may influence the impact that the determinants, such as risk aversion, have on their choices. A recently developed choice bracketing framework recognizes that producers are unable to evaluate all alternatives simultaneously and that to manage a complex task, they often group or bracket individual alternatives and their consequences together in choice sets. Data on 1,105 U.S. producers show that producers do not use all available combinations of risk management tools and that the influence of the determinants of producer's risk management decisions are not necessarily the same across risk management strategies within and across bracketing levels. The findings may help resolve puzzling results on the role that well-known determinants of risk management behavior have on producers' choices, extending knowledge on producers' risk management behavior. Further, the findings have managerial implications for policy makers and agribusiness companies that provide risk management services. [EconLit citations: M000, G1000, Q130] © 2008 Wiley-Liss, Inc.

Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:wly:agribz:v:24:y:2008:i:1:p:31-54

DOI: 10.1002/agr.20145

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