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Subjective beliefs and decision making under uncertainty in the field

Sandip Kumar Agarwal

No 201701010800006248, ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: Nutrient management decision under uncertainty is a critical and complex decision that a farmer has to make on his field. It is complex as it is a decision that may be linked to several other decisions on their field.Research studies have shown that nutrient application alters the crop yield density. This indicates that nutrient is not limited to be a productive input, but it can also be used as a tool for risk management under uncertainty in agriculture.Researchers have developed models of decision making under uncertainty in agriculture and elsewhere, where strong restrictions on the decision making agents' perception and preferences has been imposed to identify the underlying decision process. Similar, framework has been used for studying the farmer's nutrient decision (mostly based on expected utility or expected profit maximization framework). In the process of modeling the nutrient decision, farmer's perception (expectations) about the nitrogen uncertainty is artificially constructed, which is assumed by researchers to be rational expectations. It is important to note that the choice of optimal nitrogen in a field is a subjective concept, which rests upon the truth and validity of the assumptions introduced in the decision making framework.This dissertation relaxes those arbitrary assumptions about the nitrogen uncertainty by measuring the subjective uncertainty perceived by a farmer surrounding the chosen level of nitrogen. Although, the uncertainty around the chosen level of nitrogen is measured, nothing much can be said about the choice of optimal nitrogen. The subjective expectations of farmer around the optimal level of nitrogen are measured and juxtaposed with the agronomic benchmark. This dissertation is a contribution to the field by providing factual evidence about the discordance between the subjective beliefs of farmers to objective reality. More broadly, this research is an effort towards advancement of the study of agriculture decision making under uncertainty by measurement of subjective expectations of farmer in context to nitrogen yield mapping, which when combined with risk preferences of farmer may be able to identify the true underlying nitrogen decision model for a farmer.

New Economics Papers: this item is included in nep-agr and nep-upt
Date: 2017-01-01
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