SABIIA - Sistema Aberto e Integrado de Informação em Agricultura (Sabiia)

We study optimal disclosure of variety by a multi-product firm with random costs. In our model there are two varieties that are horizontally differentiated and differ in overall quality, but buyers cannot distinguish between them without labels. The equilibrium prices for labeled varieties are increasing functions of the absolute value of the cost differential and do not reveal which variety is cheaper to produce. Nondisclosure is most common when there is moderate uncertainty about the relative input cost, not too much idiosyncrasy in consumer valuations, and not too much difference in quality across varieties. Although mandatory disclosure of variety benefits consumers, it decreases expected welfare when relative input cost variability is large and...

Country of Origin Labeling with Horizontal Differentiation and Cost Variability

Palavras-chave: Agribusiness; Agricultural and Food Policy; Food Consumption/Nutrition/Food Safety; Industrial Organization; Marketing; Information; Labeling; Quality disclosure; Product differentiation.

Ano: 2011

URL: http://purl.umn.edu/103540

This paper studies whether a seller achieves higher profits by providing consumers with information that allows them to distinguish between products from different countries, and how mandatory provision of such information impacts welfare. We analyze a model of multi-product monopoly with horizontal differentiation and random country-specific input costs. We find that if the variability in the input costs is sufficiently high and the share of consumers with high valuations is in some intermediate range, the seller prefers to withhold information about product origin. Mandatory labeling of products with their country of origin may reduce or increase welfare depending on the share of consumers with high valuations. We also discuss extensions of the basic...

Dynamic Informative Advertising of New Experience Goods

Palavras-chave: Country of origin labeling; Consumer learning; Food policy; Agricultural and Food Policy; Industrial Organization; International Relations/Trade.

Ano: 2010

URL: http://purl.umn.edu/61328

This paper analyzes the optimal informative advertising and price policies of a monopolist who sells a new experience good over time to a population of heterogeneous buyers. Under certain conditions, the advertising rate first increases and then decreases over the marketing cycle with a peak occurring at the end of the introductory period when prices are low. Advertising lowers introductory prices but also shortens the period during which they are offered. Advertising raises the share of consumers who know their valuation in the long-run but not necessarily in the short-run

Dynamic Informative Advertising of New Experience Goods

Palavras-chave: Monopoly; Private Information; Consumer Learning; Informative Advertising; Consumer/Household Economics; Industrial Organization; Marketing.

Ano: 2010

URL: http://purl.umn.edu/61326

This paper analyzes the optimal advertising and price policies of a monopolist who sells a new experience good over time to a population of heterogeneous forward-looking buyers. We consider informative advertising that can complement or substitute for learning-by-purchasing, and show that the advertising intensity always peaks during the early stages when the price extracts surplus from the buyers who are yet to learn their valuation for the good. We also show that even though informative advertising may temporarily raise prices and slow down the learning process, an advertising ban can reduce welfare.

EQUILIBRIUM AND EFFICIENT LAND-USE ARRANGEMENTS UNDER SPATIAL EXTERNALITY ON A LATTICE

Palavras-chave: Monopoly; Advertising; Experience Goods; Learning; Private Information; Agribusiness; Agricultural and Food Policy; Demand and Price Analysis; Industrial Organization; Marketing.

Ano: 2011

URL: http://purl.umn.edu/103536

Many cases of externalities in agricultural production, such as pesticide drift, cross-pollination, and offensive odors, are attributable to the incompatibility of neighboring land uses and exhibit distance dependence. We characterize equilibrium spatial patterns of externality-generating and -receiving land uses on a two-dimensional lattice with noncooperative, profit-maximizing producers. In equilibrium, generators or recipients form one or more neighborhoods with certain geometric properties, depending on how an externality dissipates with distance and whether there is an externality generated outside the region's boundaries. Efficient land-use arrangements maximize social welfare subject to the implementability constraints stipulating that no...

FAIR VALUE OF WHOLE-FARM AND CROP-SPECIFIC REVENUE INSURANCE

Palavras-chave: Graph partitioning; Land-use arrangement; Spatial externality; Supermodular game; Land Economics/Use.

Ano: 2004

URL: http://purl.umn.edu/18501

Hennessy, David A.; Saak, Alexander E.; Babcock, Bruce A..

The U.S. market in subsidized commodity revenue insurance contracts has expanded rapidly since 1996. By far the most prevalent contract forms are crop-specific, rather than the whole-farm design which has a better claim to being optimal. For an arbitrary acre allocation vector, this paper inquires into absolute and relative determinants of the actuarial costs of these forms. The actuarial value of whole-farm insurance increases under a particular characterization of >more systematic= risk, whereas the actuarial value of insurance through crop-specific contracts need not change. Upon fixing stochastic revenue interactions, we identify conditions such that the expected cost of revenue insurance via crop-specific contracts is increasing under a more...

Groundwater Pumping by Heterogeneous Users

Palavras-chave: Risk and Uncertainty.

Ano: 2003

URL: http://purl.umn.edu/21988

Saak, Alexander E.; Peterson, Jeffrey M..

Farm size is a significant determinant of both groundwater irrigated farm acreage and groundwater irrigation application rates per acre. This paper analyzes the patterns of groundwater exploitation when resource users in the area overlying a common aquifer are heterogeneous. In the presence of user heterogeneity, the common resource problem consists of inefficient dynamic and spatial allocation of groundwater because it impacts income distribution not only across periods but also across farmers. Under competitive allocation, smaller farmers pump groundwater faster if farmers have a constant marginal periodic utility of income. However, it is possible that larger farmers pump faster if the Arrow-Pratt coefficient of relative risk-aversion is sufficiently...

Groundwater Use in Asymmetric Aquifer under Incomplete Information

Palavras-chave: Common property resource; Groundwater; Majorization; Resource /Energy Economics and Policy.

Ano: 2007

URL: http://purl.umn.edu/9798

This paper analyzes a game theoretic model of groundwater extraction in an asymmetric two-cell aquifer under incomplete information about the extent to which the local stock of groundwater depends on the extraction histories at nearby wells. A novel assumption is that the elevation of the bottom of the aquifer differs across, otherwise identical, cells. Asymmetry creates a strategic advantage (disadvantage) for the user in the deep (shallow) cell in “stealing” neighbor’s water. The user with a larger initial stock actually benefits from the commonality of groundwater provided that the asymmetry is not too small or too great. Assuming that the asymmetry between users is sufficiently large, better informed, non-cooperative users attain a higher joint...

Groundwater Use under Incomplete Information

Palavras-chave: Common property resource; Asymmetry; Groundwater; Information; Resource /Energy Economics and Policy.

Ano: 2008

URL: http://purl.umn.edu/6545

Saak, Alexander E.; Peterson, Jeffrey M..

In this paper, we introduce a game theoretic model of groundwater extraction in a two-cell aquifer under incomplete information. A novel assumption is that individual users have incomplete knowledge of the speed of lateral flows in the aquifer: although a user is aware that his neighbor's water use has some influence on their future water stock, they are uncertain about the degree of this impact. We find that the lack of information may either increase or decrease the rate of water use and welfare. In a two-period framework, the relevant characteristic is the ratio of the periodic marginal benefits of water use. Depending on whether this ratio is convex or concave, the average speed with which the aquifer is depleted decreases or increases when users...

IDENTITY PRESERVATION AND FALSE LABELING IN THE FOOD SUPPLY CHAIN

Palavras-chave: Resource /Energy Economics and Policy.

Ano: 2006

URL: http://purl.umn.edu/21190

The paper addresses two issues pertaining to the market differentiation between non-genetically modified (non-GM) and genetically modified (GM) food varieties. First, a cost-efficiency explanation is given for the discrepancy between the observed shares of identity preserved non-GM variety and the total supply of the variety. Second, the analysis shows that when products can be falsely labeled as non-GM, the share of false labeling depends on the level of identity preservation. In this context, the analysis demonstrates that the share of falsely labeled supply can increase in response to harsher fines.

IDENTITY PRESERVATION AND FALSE NON-GMO LABELING IN THE FOOD SUPPLY CHAIN

Palavras-chave: Food Consumption/Nutrition/Food Safety.

Ano: 2002

URL: http://purl.umn.edu/18614

This paper addresses two issues pertaining to the market differentiation between non-genetically modified and genetically modified food varieties. First, a cost-efficiency explanation of the discrepancy between the observed shares of identity preserved non-genetically modified variety and the total supply of the variety is provided. Second, it is shown that when products can be falsely labeled as non-genetically modified, the share of false labeling depends on the level of identity preservation. Also in this context, it is demonstrated that the share of falsely labeled supply can increase in response to harsher fines.

LOCATION AND MARKETING UNDER MARKETING ASSISTANCE LOAN AND LOAN DEFICIENCY PAYMENT PROGRAMS

Palavras-chave: Agribusiness.

Ano: 2003

URL: http://purl.umn.edu/22182

Marketing assistance loan (MAL) and loan deficiency payment (LDP) programs differ in their treatment of basis. This paper analyzes marketing decisions under these programs when producers are differentiated by location with respect to the terminal market. The developed model may help explain the observed lack of an association between the county loan rate and the share of a county's production enrolled in MAL programs. Under certain conditions, multiple equilibria are shown to emerge. The effects of MAL and LDP programs on welfare and policy implications are discussed.

LOCATION, LAND QUALITY, AND RENTAL VOLATILITY

Palavras-chave: Marketing.

Ano: 2002

URL: http://purl.umn.edu/18464

Saak, Alexander E.; Hennessy, David A..

It appears to be widely believed that returns on low quality land are more variable than on high quality land. Using Ricardian rent as the measure of returns and sensitivity to output price as the measure of volatility, we investigate this null hypothesis for three different measures of quality. These are proximity to market, output productivity, and cost efficiency. In all cases, we identify precise conditions on the production technology such that rental volatility varies in a monotone manner with land quality. A method of econometric investigation of the relationship between rental volatility and land quality is developed and applied to Iowa cash rents data collected during 1994-2000. Our preliminary findings provide partial empirical support for...

LOCATION, PLANTING DECISIONS, AND THE MARKETING OF QUALITY-DIFFERENTIATED AGRICULTURAL COMMODITIES

Palavras-chave: Land Economics/Use.

Ano: 2001

URL: http://purl.umn.edu/20747

In a marketing environment, the demand conditions, the costs of shipping and storing grain varieties, the interest rate on farm loans, and the distribution of cropland in the area are important determinants of growers' planting decisions. In this article, I focus on a market for two quality-differentiated agricultural commodities: one produced with the use of biotechnology and the other, without. I develop a model for analyzing the equilibrium planting and marketing decisions made by geographically dispersed producers during the marketing year following harvest. I identify the types of marketing environments leading to a greater concentration of equilibrium acreage planted to a particular grain variety near the market and investigate the effects of the...

ON THE DEMAND FOR A STATE-CONTINGENT, COST-SAVING SEED TRAIT

Palavras-chave: Commodity prices; Grain storage; Location; Marketing; Product quality; Supermodularity; Crop Production/Industries.

Ano: 2003

URL: http://purl.umn.edu/18427

Hennessy, David A.; Saak, Alexander E..

Biotechnology has enriched the strategy set available to crop managers. Suppose a manager faces a decision between applying a pre-emergence pesticide or applying nothing at all. The advent of pesticide tolerance traits in plants admits the possibility of a state-contingent post-emergence application of pesticide. The innovation adds value in large part because it provides the manager with the option to wait for more information. For heterogeneous acre types, the determinants of trait royalties and of crop management strategies in equilibrium are studied. Pest resistance traits have different implications for crop management. Whereas a tolerance trait likely complements information technologies, the addition of a resistance trait may substitute for them.

ON THE PREMIUM FOR REVENUE INSURANCE UNDER JOINT PRICE AND YIELD RISK

Palavras-chave: Genetic trait; Information inputs; Patent value; Real option; Crop Production/Industries.

Ano: 2002

URL: http://purl.umn.edu/18515

This note provides two results pertaining to the pricing of agricultural revenue insurance contracts under joint price and yield risk. First, a weakening of the concordance ordering is used to sign the effect of greater dependence between the multiplicative risks (price and yield) on the expected indemnity payment. Second, sufficient conditions are found when the premium rate for revenue insurance is smaller (greater) than the premium for the corresponding single risk (price or yield) insurance.