Agricultural Investors Valuing Sequences of Monetary Rewards – Results of an Experiment. Issue 3 (19th August 2014)

• Record Type: Journal Article
• Authors: Steinhorst, Martin Philipp; Bahrs, Enno
• Editors: Turvey, CalumG; Turvey, CalumG
• Is Part Of: Agricultural finance review. Volume 74:Issue 3(2014)
• Publication Date: 2014-08-19
• Subjects: Agriculture -- Finance -- Periodicals; Agriculture -- Finance -- Statistics -- Periodicals; Agricultural insurance -- Periodicals; Agriculture -- Taxation -- Periodicals; 332.71
• DOI: 10.1108/AFR-06-2013-0026
• Languages: English
• ISSNs: 0002-1466

Abstract

Abstract : Purpose: This paper quantifies the differences between the classical normative investment theory and alternative investment models of agricultural stakeholders' choices. Design/methodology/approach: Farmers (N=1, 024) and agricultural commodity traders (N=509) were asked to rank investment alternatives. Non-linear regressions were integrated into a MONANOVA algorithm to analyze the investment rankings. The results reveal coefficients for classical constant discounting, hyperbolic discounting and a preference for a sequence model. Two information criteria indicate the models' goodness of fit and allow a comparison of the investment rankings of different age groups. Findings: Agribusiness stakeholders have preferences for sequences and could be willing to accept lower internal rates of return for monotone-distributed rewards. Practical implications: The results are useful for state-aided agricultural investment policies and contractual relations within agribusiness. Originality/value: To our knowledge, this paper is the first paper to analyse agricultural stakeholders' preferences for sequences.