Uncertain Land Availability and Perceived Biases in Investment Decisions: The Case of Dutch Dairy Farms

Eli Feinerman and Jack H.M. Peerlings

No 24949, 2002 International Congress, August 28-31, 2002, Zaragoza, Spain from European Association of Agricultural Economists

Abstract: Uncertainty about the possibility of acquiring land can be rather large in the EU for sectors like dairy farming. Farm-level investment decisions are commonly made ex-ante when the farmer is not certain about the possibility of purchasing land. This possibility is realized only in a future period. In this paper, we have developed and applied a simple two-period model in which a profit-maximizing farmer, facing uncertainty about the possibility of acquiring land, had to choose the optimal mix of capital (buildings) investment and land endowment. We have shown that commonly "observed" biases towards non-optimal investment decisions are not necessarily justified. Rather, these perceived biases may be the result of evaluating investment decisions without reference to the uncertainty associated with the possibility of acquiring land.

Keywords: Land; Economics/Use (search for similar items in EconPapers)
Pages: 19
Date: 2002
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Persistent link: https://EconPapers.repec.org/RePEc:ags:eaae02:24949

DOI: 10.22004/ag.econ.24949

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