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SUPPLY RESPONSES, RISK AVERSION AND COVARIANCES IN AGRICULTURE

SUPPLY RESPONSES, RISK AVERSION AND COVARIANCES IN AGRICULTURE Australian JournalofAgriculturalEconomics, Vol. 30, Nos 2 and 3 (Aug/Dec 1986), pp. 153-156 SUPPLY RESPONSES, RISK AVERSION AND COVARIANCES IN AGRICULTURE R. W. FRASER* University of Western Australia, Nedlunds, WA 6009 In recent research (Fraser 1984; Grant 1985), the problem of a risk averse producer facing uncertainty of both price and output where these two uncertainties are correlated has been analysed. These papers represent extensions of the work of Anderson, Dillon and Hardaker (1 977) and Newbery and Stiglitz (1 98 1) to the examination of the impact of such a covariance on the optimal hedging decision (Grant 1985) and on a producer’s expected utility of income (Fraser 1984). The objective in this paper is to extend the latter analysis by examining the subsequent supply response of a producer to the effect of a covariance on the expected utility of income. Using the model of a risk averse producer of Newbery and Stiglitz (1981, pp. 80-5) to examine this problem, it is possible to show the circumstances in which the influence of this covariance will lead to an increase or a decrease in the producer’s optimal level of effort (and consequently, planned supply). I Apart from its contribution to the http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Australian Journal of Agricultural Resource Economics Wiley

SUPPLY RESPONSES, RISK AVERSION AND COVARIANCES IN AGRICULTURE

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References (1)

Publisher
Wiley
Copyright
Copyright © 1986 Wiley Subscription Services, Inc., A Wiley Company
ISSN
1364-985X
eISSN
1467-8489
DOI
10.1111/j.1467-8489.1986.tb00662.x
Publisher site
See Article on Publisher Site

Abstract

Australian JournalofAgriculturalEconomics, Vol. 30, Nos 2 and 3 (Aug/Dec 1986), pp. 153-156 SUPPLY RESPONSES, RISK AVERSION AND COVARIANCES IN AGRICULTURE R. W. FRASER* University of Western Australia, Nedlunds, WA 6009 In recent research (Fraser 1984; Grant 1985), the problem of a risk averse producer facing uncertainty of both price and output where these two uncertainties are correlated has been analysed. These papers represent extensions of the work of Anderson, Dillon and Hardaker (1 977) and Newbery and Stiglitz (1 98 1) to the examination of the impact of such a covariance on the optimal hedging decision (Grant 1985) and on a producer’s expected utility of income (Fraser 1984). The objective in this paper is to extend the latter analysis by examining the subsequent supply response of a producer to the effect of a covariance on the expected utility of income. Using the model of a risk averse producer of Newbery and Stiglitz (1981, pp. 80-5) to examine this problem, it is possible to show the circumstances in which the influence of this covariance will lead to an increase or a decrease in the producer’s optimal level of effort (and consequently, planned supply). I Apart from its contribution to the

Journal

The Australian Journal of Agricultural Resource Economics – Wiley

Published: Dec 12, 1986

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