Cooper, Joseph C.

By: Arnade, Carlos Anthony; Cooper, Joseph C.
The assumption in standard expected utility model formulations that the coefficient of risk aversion is a constant is potentially unrealistic. This study takes the standard linear expected meanvariance problem and replaces the coefficient of risk aversion with a function of risk aversion, allowing risk to be depicted as a constraint that farmers face. Treating output prices as stochastic, the theoretical formulation measures the impact price variability itself has on risk preferences. Acreage response elasticities are also estimated as a function of prices and price variances using U.S. county-level data for corn, soybean, and wheat producers.
By: Cooper, Joseph C.
Using farmer responses to contingent valuation method (CVM) survey data in combination with actual market data from four watershed regions in the United States, this study estimates the minimum incentives payments a farmer would accept in order to adopt more environmentally friendly "best management practices" (BMPs). Combining actual market data with the CVM data adds information to the analysis, thereby most likely increasing the reliability of the results compared to analyzing the contingent behavior survey response data only. Given the decision to adopt, the article also presents a pooled model for the number of acres enrolled in the BMPs as a function of the incentive payments. Adoption rates predicted with the combination data model are significantly higher over a wide range of offers than those predicted using the traditional discrete choice analysis with the hypothetical data only. Hence, using the traditional CVM analysis results to determine payments to attain a given level of adoption may result in overpayment.