Effects of decoupling on the mean and variability of output

The influence of inputs on output risk in the context of agriculturalproduction decisions taken by non-risk neutral agents has beenignored by previous research assessing the effects of decoupledincome support payments in a deterministic world or risk-neutralframework. We study the impacts of decoupled payments on inputuse and on output mean and variance. Our theoretical frameworkfor studying agricultural producers' responses to lump sum paymentsallows for both output and price uncertainty and economic agents'risk attitudes. Results show the importance, in a non-risk neutralscenario, of considering the influence that economic agentshave on the stochastic component of output through input use.Our empirical application uses Kansas farm-level data to illustratethe model.