SENSITIVITY OF FARM PLANS UNDER RISK-AVERSE BEHAVIOR - A NOTE ON THE ENVIRONMENTAL IMPLICATIONS

This study demonstrates that the intensity of farm-level land use can be extremely sensitive to minor reductions in expected farm income when the risk-averse farmer makes utility maximising decisions. The study uses directly elicited utility functions for farmers in the North of England in conjunction with MOTAD generated E,V frontiers. The results imply that instability encourages the use of less intensive fanning methods and therefore could actually assist the achievement of environmental policy goals.