Marketed surplus under risk: Do peasants agree with sandmo?

Israel Finkelshtain, James A. Chalfant

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71 Scopus citations

Abstract

Using a newly defined notion of aversion to income risk, the behavior of the marketed- surplus producer under price risk is characterized. Unlike the familiar case first examined by Sandmo, output depends on both ordinal preferences for goods and on risk attitudes. Conditions are found that yield an output level under risk that is smaller than under certainty. If these conditions do not hold, both risk and risk aversion may have a positive effect on output. Implications for econometric studies of risk attitudes are considered and illustrated with an example. Finally, we examine the effect of uncertainty on the peasant’s long-run equilibrium.

Original languageAmerican English
Pages (from-to)557-567
Number of pages11
JournalAmerican Journal of Agricultural Economics
Volume73
Issue number3
DOIs
StatePublished - Aug 1991

Keywords

  • Marketed surplus
  • Peasant households
  • Production under multivariate risk

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