Towards a Behavioral Theory of Farmer Decision -Making: The Value of Site -Specific Information in Agricultural Production

Abstract

The results of the numerical optimization model indicates that for uniform applications of N fertilizer, imperfect SSI about soil N levels will only be valuable in a typical Illinois farm if the costs of acquiring that information is not more than $1.05 per acre. Costs greater than this will not give value to producers that will compensate the cost of acquiring information. Comparative statics from the numerical model showed that the accuracy or the level of informativeness of SSI, the degree of risk-aversion, management ability, and the level of prior uncertainty; all have a positive relationship with the value of SSI. On the other hand, initial wealth is numerically shown to have a negative relationship with the value of SSI. Furthermore, mean input use is found to decrease as SSI becomes more informative. The empirical results above have important implications with respect to nitrogen information management, environmental management, and predicting adoption behavior.