By Deann Gayman
A new study from University of Nebraska–Lincoln agricultural economists finds that producers with safety-first risk preferences likely make notably different grain-marketing decisions than those without, offering a glimpse into how and why producers market their harvests.
Specifically, according to the economic experiment highlighted in the article published in Agricultural Financial Review, participants with safety-first risk preferences sell about 8.45% more of their harvest in the first month of the marketing year. And it is likely that many producers have safety-first risk preferences in the real world, as 45% of experiment participants showed safety-first preferences, even in the controlled stylized setup.
Safety first — a behavioral basis for decisions made under risk and uncertainty to minimize the probability of a disastrous outcome and produce a minimal accepted return on investment — has been widely applied to economics literature but has gotten little attention in the agricultural economics space, especially in the examination of grain marketing decisions.
Source : unl.edu