Behavioral Economics

This is a relatively new line of inquiry and is an active area for the ERS Chair. The idea is that many decision settings in production agriculture are in important ways not all that dissimilar from decision settings where retail consumption, personal finance and healthcare are made. There is by now widespread evidence of non-standard behavior (as far as classical economic theory goes) in these latter areas. One might argue that competitive pressure and the repeated nature of many farm-level decisions may force agricultural decision-makers toward some form of constrained optimal choice in the rather narrow senses considered by standard microeconomic theory. However, agricultural decision settings are seldom repeats because weather, technological opportunities, and available government program choices change. In addition, many farmers have the resources and the perspective to seek to make their farming activities compatible with lifestyle choices, but satisficing motives are not accounted for when seeking to characterize on-farm decisions. One point of investigation has to do with crop insurance choices, see

  • Du, X., H. Feng, and D.A. Hennessy. “Rationality of Choices in Subsidized Crop Insurance Markets.” American Journal of Agricultural Economics, 99(3, 2017):732-756. Link

This work motivated a grant application (successful):

Grant:

Hennessy, D.A., Feng, H., Blankenship, K.L. “Exploring a New Paradigm For Understanding Farmers’ Crop Insurance Decisions: Integrating Economic, Psychological, and Farmer Perspectives.” USDA National Institute of Food and Agriculture in Exploratory Program Area (A1801), $99,370, completed in 2017.

The grant and data obtained are currently being analyzed. Other topics that are being addressed in the behavioral area include land conversion choices, perception formation regarding landscape configuration, and the administration of animal healthcare inputs.

Presentations at Meetings (not in Published Proceedings)

  • Doidge, M., H. Feng, and D.A. Hennessy. “Farmers’ revenue conditions predictions and land conversion decisions: evidence of the gambler's fallacy.” Selected 20 min paper presentation at AAEA Annual Meeting, Chicago, IL, July 30-Aug. 1, 2017.
  • Perry, E., D.A. Hennessy, and G. Moschini. “Product Formulation and Glyphosate Application Rates: Confusion or Rational Behavior?” Selected 20 min paper presentation at AAEA Annual Meeting, Chicago, IL, July 30-Aug. 1, 2017.
  • Che, Y., H. Feng, and D.A. Hennessy. “The Geography and Psychology of Participation in U.S. Federal Crop Insurance Programs.” Selected 20 min paper presentation at AAEA Annual Meeting, Chicago, IL, July 30-Aug. 1, 2017.
  • Feng, H., T. Wang, and D.A. Hennessy. “Perception Biases and Land Use Decisions.” Selected paper presented in a Lightning session at AAEA Annual Meeting, Chicago, IL, July 30-Aug. 1, 2017.
  • Doidge, M., H. Feng, and D.A. Hennessy. “Trade-offs in farmers’ crop insurance choices: coverage level vs. premium price.” Selected 20 min paper presentation at Canadian Agric. Econ. Soc. Annual Meeting, Montréal, Quebec, June 18-21, 2017.

Poster Presentations

  • Doidge, M., H. Feng, and D.A. Hennessy. “Farmers’ Revenue Condition Predictions: Evidence of the Gambler’s Fallacy?” Presented at 2017 Southern Ontario Behavioural Decision Research Conference, Queen’s University, Kingston, Ontario, May 12.
  • Doidge, M., D.A. Hennessy, and H. Feng. “Motive for grassland maintenance and conversion choices.” Selected poster presented at AAEA Annual Meeting, Chicago, IL, July 30-Aug. 1, 2017.

Theory

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