2nd UF Water Institute Symposium Abstract

Submitter's Name Charles Moss
Session Name Poster Session: Human Dimensions of Water Sustainability 2
Category Human dimensions of water sustainability
Poster Number 114
Author(s) Charles B. Moss,  UF Food and Resource Economics Department
  Alfonso Flores-Lagunes,  UF Food and Resource Economics Department
  Modeling the Stochastic Nature of Agricultural Production Functions: Implications of State-Dependent Specifications for Water Use
  The concept of risk is endemic to agricultural production. Plagues and droughts date from primeval stories to more recent experiences of the dustbowl era. However, systematic analysis of the effect of weather fluctuations on production decisions is less evident. Moss (2009) provides an overview of agricultural decision making under risk and uncertainty, but most of the models presented deal more with the decision of selecting among risky alternatives than production decisions involving input selection. A more complete model of decision production decisions under uncertainty can be found in the stochastic production function proposed by Just and Pope (1978). This formulation allows for the analysis of the effect of input decisions on the riskiness of production (modeled as the squared deviation). The Just and Pope formulation measures risk as dispersion around an average production function. An alternative approach is to measure the variation in the production function itself using a Quantile regression specification for the production function. The later specification the shape of the production function (and hence the marginal physical product of inputs) to shift with random variations in production. The purpose of this study is to evaluate the implications of each specification in modeling optimizing behavior under weather fluctuations. Ultimately, we intend to develop a specification of irrigation decisions consistent with this stochastic specification.