Elicitation of irrigators' risk preferences from observed behaviour |
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| Authors: | Céline Nauges Sarah Ann Wheeler Alec Zuo |
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| Affiliation: | 1. Toulouse School of Economics (France);2. University of Queensland (Australia);3. Global Food StudiesUniversity of Adelaide (Australia);4. School of CommerceUniversity of South Australia;5. University of Adelaide (Australia);6. University of South Australia |
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| Abstract: | Water trading in the Murray–Darling Basin of Australia has developed to the point where it is a common adaptation tool used by irrigators, making it an apt case study to elicit the marginal value of irrigation water and irrigators' risk preferences in two key industries with differing levels of water dependence. Our data come from large‐scale and representative surveys of irrigated broadacre and horticultural farms in the Murray–Darling Basin over a 6‐year period. The marginal contribution of irrigation water to profit is estimated at $547 and $61/ML on average in horticulture and broadacre, respectively. Horticultural irrigators are found to be averse to the risk of large losses (downside risk) while broadacre irrigators are averse to the variability (variance) of profit. |
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| Keywords: | irrigation marginal value of water Murray– Darling Basin profit function risk preferences |
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