Investing Today or Tomorrow? An Experimental Approach to Farmers’ Decision Behaviour

An understanding of farmers’ decision‐making behaviour is important for adequate forecasts as well as policy recommendations regarding structural changes. We experimentally analyse the investment behaviour of real farmers. The observed investment decisions are contrasted with theoretical benchmarks from classical investment theory and the real options approach. Our results show that both theories cannot exactly explain investment behaviour. However, farmers learn from former investment decisions and do consider the value of waiting over time.     

A model of entry–exit decisions and capacity choice under demand uncertainty

Many investment decisions of agribusiness firms, such as when to invest in an emerging market or whether to expand the capacity of the firm, involve irreversible investment and uncertainty about demand, cost or competition. This paper uses an option‐value model to examine the factors affecting an agribusiness firm's decision whether and how much to invest in an emerging market under demand uncertainty. Demand uncertainty and irreversibility of investment make investment less desirable than the net present value (NPV) rule indicates. The inactive firm is more reluctant to enter the market when it takes into account demand uncertainty because it preserves the opportunity of making a better investment later. The active firm is more reluctant to abandon the investment because there is an option value of keeping the operation alive. There is a greater distance between the entry and exit thresholds under the option‐value approach than under the NPV rule due to demand uncertainty. The results have implications for agribusiness decision‐making.     

Does research applying the DPSIR framework support decision making?

The Driver-Pressure-State-Impact-Response (DPSIR) framework was developed in the late 1990s to structure and organize indicators in a meaningful way. Since then, the framework has increasingly been applied in research projects with the aim of supporting decision making. A number of attributes of the framework regarding structuring and communication issues in research further strengthen its original purpose of bridging the science policy gap. We reviewed several studies that were mainly concerned with criticism and drawbacks of the DPSIR framework. Based on these studies and our own experiences in applying the DPSIR framework in an EU project to develop a decision support tool, we developed two criteria that we believe are crucial for policy relevant research: (a) the development of conceptual models integrating knowledge from different disciplines, specialists and policy makers, as well as those affected by their decisions; and (b) the potential to explain the results and analysis of research to different disciplines, specialists, stakeholders and the public and to demonstrate alternatives and provide decision options. We analyzed 21 studies using the DPSIR framework with regard to their relevance for decision making. We analyzed the definitions of the five DPSIR elements and whether specific end users were addressed in the respective studies. We found that in many studies, the DPSIR elements were defined in literature review or by researchers and that only a few studies targeted specific government authorities as users of research results. Eight out of 21 studies applied transdisciplinary research concepts and integrated broad ranges of stakeholder opinions and values into the research. Nine out of 21 studies presented alternative outcomes to decision makers and used the valuation of these outcomes by stakeholders to add further support to the decision-making process. The different positive and negative implications of the DPSIR framework are discussed with reference to research that supports policy making. Finally, we conclude that studies employing DPSIR may provide effective solutions for “real world problems” by taking into account additional criteria based on knowledge integration, stakeholder involvement and the provision of alternatives. Therefore, DPSIR is a useful tool to support decision making by means of showing solid evidence with alternatives and decision options, rather than by presenting predetermined solutions.     

A markup over average cost pricing rule for meat and poultry in the United States

This paper tests the hypothesis that meat and poultry wholesalers choose their inventory levels together with wholesale price so as to maximize profit made over the sales time of their stock. The behavioral assumption predicts that markup over average cost will match the inverse of the price elasticity of the sales time of inventory. Price elasticity of inventory sales time is estimated for beef, pork and poultry accounting for the simultaneity between these pricing decisions by adopting a systems approach. The estimated range for the inverse of these elasticities includes all the markups applied over the sample range of the time series.     

Land consolidation in Cyprus: Why is an Integrated Planning and Decision Support System required?

This paper explores issues of land fragmentation, consolidation and reallocation and argues that a new planning support system for land consolidation is needed in Cyprus because of the long duration of projects, the high operational costs and the conflicts between the stakeholders involved. An Integrated Planning and Decision Support System is proposed that integrates artificial intelligence technologies and multi-criteria decision methods with a geographical information system for use in routine land consolidation planning as well as for undertaking ex ante evaluations of land consolidation projects, as required by the European Union. A framework is provided which shows how the system will contribute to reducing the problems associated with the land consolidation process.     

Influence of strategies and heuristics on farmers' response to change under uncertainty

Hierarchical Decision Models of woolproducers' decisions provide unique insights into the impact of major price changes. Producers' lagged response in some contexts appear to be due to the ambiguous decision environment they face, their strategic goals and responses to that environment apart from lags caused by factors such as attitude to risk, expectations adjustment, adjustment costs and learning costs. Much of the response to major price changes comes from strategic decisions to change enterprises rather than marginal changes to existing enterprises. In ambiguous environments, methods may need to be found that incorporate simplifying behavioural rules and strategies.     

Local Action Groups and Rural Sustainable Development. A spatial multiple criteria approach for efficient territorial planning

Rural Sustainable Development is a very important topic under the European Union policy, and it is currently promoted through the European Agricultural Fund for Rural Development 2014–2020. This fund is managed at sub-regional level by the Community-Led Local Development approach that involves Local Action Groups in order to promote the objectives of Rural Sustainable Development within rural municipalities. Each Local Action Group applies the Strengths, Weaknesses, Opportunities and Threats analysis in order to identify for its own rural municipalities the strategic elements to which it will allocate the European Agricultural Fund for Rural Development budget. Nevertheless, this analysis has some general shortcomings, including difficulties in managing a large number of Strength and Weakness factors. In addition, the importance of each factor cannot be measured quantitatively, and the same factor may be characterized both as a Strength and a Weakness. Further difficulties may occur in the case of partnerships between different Local Action Groups, such as disagreement about whether a given factor is a Strength or a Weakness, lack of information about the relationships between Strength and a Weakness factors and decision alternatives, as well as impossibility of ranking the decision alternatives.Thus, this research aims to overcome the drawbacks of the Strengths, Weaknesses, Opportunities and Threats analysis and to support Local Action Group partnerships in the sustainability evaluation of their rural municipalities, and therefore to aid the identification of a common Rural Sustainable Development strategy to allocate the European Agricultural Fund for Rural Development budget. This decision problem was tackled by applying a Multiple Criteria Spatial Decision Support System that integrates a Geographic Information System with the Multiple Criteria Decision Aiding methods “Technique for Order Preference by Similarity to Ideal Solution” and “Dominance-based Rough Set Approach”.In order to demonstrate the validity of this methodological approach, this Multiple Criteria Spatial Decision Support System was applied to a study area of thirteen rural municipalities located in Apulia Region (Southern Italy); these municipalities belong to the same landscape unit, but they are managed by five different policy makers that represent the Local Action Groups. The results provided the maps of environmental, economic and social sustainability rankings of rural municipalities as well as their overall sustainability value. Based on these rankings, a specific Rural Sustainable Development strategy was identified for the allocation of the European Agricultural Fund for Rural Development. This methodology provided a common decision making framework that can also be applied to Local Action Group partnerships within the European Union.     

Context sensitive policy instruments: A multi-criteria decision analysis for safeguarding forest habitats in Southwestern Finland

Environmental and conservation decisions are often complex, which results in complexity also in policy assessments. Conservation decisions have implications for different stakeholders and typically draw on multidisciplinary knowledge bases, incorporating natural, physical and social sciences, politics and ethics. Multi-Criteria Decision Analysis (MCDA) is a potentially important tool for supporting conservation policy decisions. This article reports a spatially referenced MCDA of policy instrument scenarios for conserving forest biodiversity in Southwestern Finland. The effects of the realistic policy instruments designed in dialogue with stakeholders included voluntary permanent conservation, enforced spatially concentrated permanent conservation, voluntary permanent conservation with active nature management, and voluntary temporary conservation. These instruments were compared by combining forest-owner survey, MCDA and ex ante impact evaluation. The main objective was to find the forest biodiversity conservation instrument that would produce the highest total benefit. The effects of the different instruments were evaluated with ecological, economic, social, and institutional criteria after a 20-year time period. The results showed minor differences between the instruments, with voluntary permanent and voluntary temporary conservation producing the largest total benefit. Despite the small differences, the analysis was robust in showing that voluntary instruments were more favourable than enforced permanent conservation.     

An analytical approach with a reliable logic and a ranking policy for post-mining land-use determination

Because it is the post-mining land-use that prescribes the methods, the measures and the costs of mine reclamation, a major implicit goal of mine reclamation is to determine an after-use option. Therefore, there should be an analytical approach to optimize the determination of post-mining land-use. A Mined Land Suitability Analysis (MLSA) framework, which had been previously derived from reclamation practice reports of mines and other disturbed lands, is used in combination with two Multi-Attribute Decision-Making (MADM) techniques to provide the required analytical approach. In the proposed approach the decision makers consist of the most related experts and the identified stakeholders. The Analytical Hierarchy Process (AHP) method is used to determine global weights of MLSA framework attributes via pair-wise comparison matrixes composed by each individual expert. Once the global weight vector of the attributes is calculated using AHP, they are incorporated into the decision matrices composed by stakeholders and passed to the Technique for Order Preference by Similarity to Ideal Solution (TOPSIS), which is a distance-based MADM technique and is used to determine preference order of post-mining land uses.     

Risk Behaviours and Grazing Land Management: A Framed Field Experiment and Linkages to Range Land Condition

We use a framed field experiment considering hypothetical stocking rate decisions made by grazing enterprise managers and estimate non‐linear multinomial logit models for a range of nested non‐expected utility and expected utility models. The risk and decision‐bias parameters for five models estimated for individual responses are shown to be significantly related to land condition but in ways which suggest behavioural aspects of decision making are critical in understanding land management and stocking rate decisions. Our results show that individual heterogeneity in decision making amongst farming groups is likely to be a significant source of variation in farming intensity and technology adoption decisions. This heterogeneity does not appear to be a reflection of socio‐demographic characteristics. Furthermore, decision functions appear to be biased toward selection of simpler representative functions (e.g. Expected Utility) for sample averages. This suggests that experimental findings that Expected Utility is representative for actual decisions may be due to sample averaging rather than reflect actual behaviour.     

Junk Car Clash on the Rural–Urban Fringe: A Case Study in Local Government Decision Making

This decision case is intended to provide an example of the complexity of local government decision making on the rural–urban fringe. In this case, a county is faced with making a decision about outlawing the existence of junk cars on personal property. Instructors can use this case to introduce topics such as zoning, takings, property rights, local government policy making, and the impact of the community on government decisions. Other issues could be explored, such as the role of culture and stereotypes in policy making, and how growth can impact local culture and lifestyle.     

Econometric-Process Models for Integrated Assessment of Agricultural Production Systems

This paper develops the conceptual and empirical basis for a class of empirical economic production models that can be linked to site-specific biophysical models for use in integrated assessment research. Site-specific data are used to estimate econometric production models, and these data and models are then incorporated into a simulation model that represents the decision-making process of the farmer as a sequence of discrete and continuous land-use and input-use decisions. An econometric-process model of the dryland grain production system of the Northern Plains demonstrates the capabilities of this type of model to simulate decision making both within and outside the range of observed data.     

PEST CONTROL DECISION MAKING: SUGAR BEET IN ENGLAND

This paper discusses approaches to the problem of pest control decision making. A farmer's pest control decisions are shown to depend on his subjective perception of the pest hazard, the controls he recognises as available to him, his subjective estimate of their net effect, and his individual decision rule or goal. A case study is discussed in which a decision model is used to compare objective pest observation with subjective perceptions of sugar beet growers. Applications of such a model for improving pest control decisions are suggested.     

Total income and ecosystem service sustainability index: Accounting applications to holm oak dehesa case study in Andalusia-Spain

This research develops the novel concept of an economic ecosystem service sustainability index from the perspective of total income theory, and presents its empirical application at the spatial unit scale of the agroforestry farm. This paper compares the results accrued from applying the refined standard System of National Accounts (rSNA) and the authors’ Agroforestry Accounting System (AAS). The AAS extends the rSNA to capture economic activities without manufactured production costs and substitutes the production cost valuations for exchange values revealed/stated by consumer willingness to pay for consumption of final products without market prices, the aim being to provide more comprehensive figures for total and environmental incomes of the agroforestry farms. Both accounting frameworks are applied to a case study of sixteen large, non-industrial, privately-owned holm oak dehesas (agroforestry farms) in Andalusia-Spain. This dehesa application provides estimates for the economic ecosystem service, total income factorial allocation, total capital and economic ecosystem service sustainability index for the aggregate and individual economic activities of the dehesa, distributed between accounts for the farmer and government institutional sector economic activities. The AAS explicit measurements of the hidden rSNA ecosystem services and environmental incomes of the dehesa allow us to further our scientific understanding of the current and future contributions of environmental income from nature to the total income of society as well as to provide information to the policy makers so that action can be taken to mitigate the depletion and degradation of environmental assets. This dehesa application reveals that environmental income measured by the AAS accounts for 67 % of total income in 2010. The dehesa AAS and rSNA ecosystem services share 34 % and 26 % of total product consumptions, respectively. Coupled with the AAS economic ecosystem service sustainability index of 0.5 and the rSNA economic ecosystem service sustainability index of 0.2, these figures indicate total product over-consumption in 2010. The dehesa case study shows that the AAS ecosystem services and environmental incomes are 2.5 and 8.4 times higher than those of the rSNA, respectively. Once the theoretic robustness of non-market product consumption simulated transaction value is accepted, as in the AAS methodology, the expected official economic ecosystem accounting framework will mainly depend on its ongoing standardization by the United Nations Statistical Division and implementation by individual governments. Thus, the challenge of standardizing and implementing such a framework is more closely linked to governmental policy measures than to the current scientific weakness of non-market product consumption valuations.     

Convenience yield and the theory of storage: applying an option‐based approach

We propose that an options‐based approach is a superior alternative to the traditional cost‐of‐carry method to model both the behaviour of convenience yields and the commodity price responses to changes in inventory levels. This approach is shown to be more robust and avoids the simplifying assumptions embedded in cost‐of‐carry valuation which fully accounts for the non‐negativity constraint on inventory. Unlike the cost‐of‐carry approach, the options‐based approach does not treat the convenience yield as an exogenous factor. This offers a more natural measure of implied convenience yields in commodity trading strategies. We test the relationship between convenience yields and inventory levels for a number of liquidly traded base metals using both methods. Our results show that the relationship between convenience yields and inventory levels is strongly defined under the options‐based approach in line with market beliefs. This result is consistent with other studies that have used the options‐based approach in other nonmetals commodity markets.     

Non‐market valuation: usage and impacts in environmental policy and management in Australia

An extensive literature exists on environmental nonmarket valuation research. It appears that results from these studies should be useful inputs to decision‐making about environmental policy or management. Here, we investigate the extent to which this occurs in practice in Australian environmental management bodies. Nonmarket valuation experts were surveyed about their studies that they believed to have influenced policy. Then, decision‐makers in environmental bodies were interviewed about the level of influence nonmarket valuation has had on their decisions. We find that researchers' perceptions of the influence that nonmarket valuation has on decision‐making are overly optimistic. Interviews with decision‐makers suggest that nonmarket valuation is little used in decision‐making. Indeed, the majority of them are unfamiliar with nonmarket valuation techniques. Nevertheless, once the concept was explained to them, many decision‐makers believed it could benefit environmental policy. Researchers' perceptions of the reasons for low usage of nonmarket valuation are largely inaccurate. We suggest a range of strategies that economists can use to promote the use of nonmarket valuation in environmental policy and management decisions, including ways to improve communication and engagement with decision‐makers, and strategies to increase the capacity for decision‐makers to use nonmarket valuation results.     

Using virtual environments and agent models in multi-criteria decision-making

Decision-making is often a complex task. There may be multiple criteria to be satisfied. The consequences of the available options will have different spatial and temporal distributions affecting different population groups and different generations. Decisions are also frequently made in a social context where perceptions can be as important as facts. In this complex environment, research into decision-making has two aspects: (a) understanding the decision process and (b) assisting the decision process. This paper is based on the premise that these are closely linked and that tools are possible which both help us to understand and provide support to decision-makers. A frequently requirement is determination of the trade-offs involved in complex decision situations. These are difficult to establish. Common approaches have used both stated preference and revealed preference techniques. The latter provides a better reflection of real decisions, primarily in market conditions, but does not have the level of experimental control available in hypothetical choice situations. Experimental economics has recently emerged to try to bridge this gap by providing for control of variables within a decision context made real by salient inducements. After review of these options, and the associated literature, we propose a series of linked developments in visualisation and modelling which will support: definition of non-dominated choice sets; interactive choice experiments which encompass spatial and temporal disaggregation; agent-based models to provide social context; and, visualisation to provide a greater sense of immersion in the decision context supported by more intuitive information. We have begun the integration of the necessary software into a virtual decision environment but this paper is focused on conceptual development.     

SUPPLY RESPONSE IN THE AUSTRALIAN SHEEP INDUSTRY: A CASE FOR DISAGGREGATION AND DYNAMICS*

Microeconomic capital goods theory was utilised to provide a theoretical framework on which a dynamic econometric model was based. Econometric procedures were then employed in an analysis of sheep producers' decision making regarding the annual supplies of wool, lamb and mutton, and annual changes in the inventory levels of sheep, lambs and ewes maintained for breeding purposes. Estimates show that wool prices provide the long-run stimulus for increases and decreases in the sheep flock while mutton and lamb prices are responsible for short-run changes in flock composition. Substitution between sheep and beef cattle is of considerable importance although no significant substitution between sheep and cropping could be found. Seasonal conditions proved to be an important short-run supply shifter, affecting both numbers and composition of the sheep flock.     

Are Household Production Decisions Cooperative? Evidence on Pastoral Migration and Milk Sales from Northern Kenya

Market-based development efforts frequently create opportunities to generate income from goods previously produced and consumed within the household. Production within the household is often characterized by a gender and age division of labor. Market development efforts to improve well-being may lead to unanticipated outcomes if household production decisions are noncooperative. We develop and test models of household decision making to investigate intrahousehold decision making in a nomadic pastoral setting from Kenya. Our results suggest that household decisions are contested, with husbands using migration decisions to resist wives' ability to market milk.     

The study of building integration into the surrounding rural landscape: Focus on implementation of a Web-based MC-SDSS and its validation by two-way participation

Everyday people are tackling various decisions. Decision problems in the spatial planning sense often are involved with many alternatives because of their complicated characters and are evaluated on multiple-perspectives based. This paper deals with the implementation of a Web-based Multi-Criteria Spatial Decision Support System (MC-SDSS) and its validation by two-way participation aimed at assessing the suitability of new rural tourism buildings integration occurred in Spanish landscapes. The proposed system focuses on the methodology combined with Multi-Criteria Decision Analysis (MCDA) that borrows Geographic Information System (GIS) capabilities. Several parameters with an overlay and index method are used to evaluate the suitability of a case study area in Spain. Based on the results of a previous work where the authors defined the first phases of a conceptual framework implementation and prototype application with the methodology, this paper presents the final web implementation and its validation. The implementation was consisted of four consecutive sections with improvements from the previous one. Then, it showed the validated results with radar diagrams, reflecting the different perception of spatial models based on the qualitative two-way content and survey data, public and academic participation, according to the sense of place and field concept. The results contribute consensus on recommendation and new knowledge within the broader field of the analysis and interpretation of the building integration with the Web-based MC-SDSS, which is fundamental to support proper land-uses and decision alternatives through accurate and efficient tool, and to able to apply other destinations.