SENSITIVITY OF FARM PLANS UNDER RISK-AVERSE BEHAVIOUR: A NOTE ON THE ENVIRONMENTAL IMPLICATIONS

This study demonstrates that the intensity of farm-level land use can be extremely sensitive to minor reductions in expected farm income when the risk-averse farmer makes utility maximising decisions. The study uses directly elicited utility functions for farmers in the North of England in conjunction with MOTAD generated E, V frontiers. The results imply that instability encourages the use of less intensive farming methods and therefore could actually assist the achievement of environmental policy goals.