Optimal Timing of Farmland Investment - An Experimental Study on Farmers' Decision Behavior -

Syster Christin Maart and Oliver Musshoff

No 103693, 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania from Agricultural and Applied Economics Association

Abstract: Optimal timing of farmland investment represents fundamental decisions for agricultural entrepreneurs. It is known that the land price value is significantly higher than the expected present value of expected future gains. In this paper we experimentally analyze the investment behavior of real farmers and contrast the observed investment decisions with theoretical benchmarks of the classical investment theory and the Real Options Approach. Furthermore, we investigate framing effects. Our results show that the framing of the investment situation has no significant influence on the decision behavior in the experiment. Moreover, the investment behavior of farmers approximates the predictions of the Real Options Approach if they are given an equitable chance to learn from personal experience.

Keywords: Agribusiness; Agricultural Finance; Farm Management; Financial Economics; Institutional and Behavioral Economics; Risk and Uncertainty (search for similar items in EconPapers)
Pages: 26
Date: 2011
New Economics Papers: this item is included in nep-exp
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea11:103693

DOI: 10.22004/ag.econ.103693

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