Publication Date

4-2003

Series Number

01-WP 286 (Revised)

Abstract

Because of payoff uncertainties combined with risk aversion and/or real options, farmers may demand a premium in order to adopt conservation tillage practices, over and above the compensation for the expected profit losses (if any). We propose a method of directly estimating the financial incentives for adopting conservation tillage and distinguishing between the expected payoff and premium of adoption based on observed behavior. We find that the premium may play a significant role in farmers’ adoption decisions.