Information Value and Risk Premium in Agricultural Production: The Case of Split Nitrogen Application for Corn

Posted: 22 Jun 2000

See all articles by Philippe Bontems

Philippe Bontems

University of Toulouse 1 - Groupe de Recherche en Economie Mathématique et Quantitative (GREMAQ); French National Institute for Agricultural Research (INRA) - Mission Informatique

Alban Thomas

University of Toulouse 1 - Toulouse School of Economics (TSE); delete

Abstract

This article considers an agricultural production model of sequential nitrogen application under risk. Because of random shocks between subsequent production stages, optimal fertilization decisions depend on the magnitude of farmers' risk aversion (risk premium), and the possibility for farmers to process information (value of information). We propose a joint estimation procedure of technology and risk aversion parameters, using a structural, simulation-based econometric procedure. Parameter estimates allow to compute both the value of information and the risk premium, which account for about 30% of fertilizer cost for Midwest corn producers.

JEL Classification: Q12

Suggested Citation

Bontems, Philippe and Thomas, Alban and Thomas, Alban, Information Value and Risk Premium in Agricultural Production: The Case of Split Nitrogen Application for Corn. Available at SSRN: https://ssrn.com/abstract=231502

Philippe Bontems (Contact Author)

University of Toulouse 1 - Groupe de Recherche en Economie Mathématique et Quantitative (GREMAQ) ( email )

Manufacture des Tabacs
21 Allees de Brienne
Toulouse, 31000
France
(33) 05 61 12 85 22 (Phone)
(33) 05 61 12 85 20 (Fax)

French National Institute for Agricultural Research (INRA) - Mission Informatique ( email )

Toulouse School of Economics, INRA, Manufacture
des tabacs, Allée de Brienne
Toulouse, 31000
France
(33) 05 61 12 85 22 (Phone)
(33) 05 61 12 85 20 (Fax)

Alban Thomas

University of Toulouse 1 - Toulouse School of Economics (TSE) ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France

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