Hostname: page-component-586b7cd67f-dlnhk Total loading time: 0 Render date: 2024-11-27T18:55:48.251Z Has data issue: false hasContentIssue false
  • English
  • Français

Search Theory Risk Preference and Farmland Preservation

Published online by Cambridge University Press:  15 September 2016

Edmund M. Tavernier ,
Farong Li  and
Tugrul T. Temel
Edmund M. Tavernier
Affiliation:
Department of Agricultural Economics and Marketing, Rutgers University
Farong Li
Affiliation:
Johnson and Johnson, New Brunswick, New Jersey
Tugrul T. Temel
Affiliation:
Department of Agricultural Economics and Marketing, Rutgers University
Get access

Abstract

This paper uses search theory to examine the role that risk preference (RP) plays in farmland preservation. Assuming that the distribution of the offer price is fixed, the analysis indicates that risk-averse agents have lower reservation prices than risk-neutral agents, and that agricultural land held by the former exits farming at a faster rate. The results also show that farmland preservation policies which increase reservation prices have a greater capitalization effect if agents are risk-loving, and that such policies, while effectively protecting the interest of land speculators, may be less effective in serving the needs of farming and farm-held open space.

Type
Articles
Information
Agricultural and Resource Economics Review , Volume 25 , Issue 1 , April 1996 , pp. 38 - 45
Copyright
Copyright © 1996 Northeastern Agricultural and Resource Economics Association 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Akerlof, G. “The Market for ‘Lemons’: Quality, Uncertainty, and the Market Mechanism.” In An Economics Theorist's Book of Tales, ed. Akerlof, G. Cambridge: Cambridge University Press, 1984.CrossRefGoogle Scholar
Anderson, J.E., and Bunch, H.C. “Agricultural Property Tax Relief: Tax Credits, Tax Rates, and Land Values.” Land Economics 65 (1989): 13–22.Google Scholar
Arrow, K.J., and Lind, Robert C., “Uncertainty and the Evaluation of Public Investment Decisions.” American Economic Review 60(3) (1970): 364–78.Google Scholar
Beaton, W.P. “The Impact of Regional Land-Use Controls on Property Values: The Case of the New Jersey Pinelands.” Land Economics 67 (1991): 172–94.CrossRefGoogle Scholar
Bellman, Richard. Dynamic Programming. Princeton: Princeton University Press, 1957.Google ScholarPubMed
Berry, David. “Effects of Urbanization on Agricultural Activities.” Growth and Change 9, no. 3 (1978): 2–8.CrossRefGoogle Scholar
Berry, David, and Plaut, Thomas. “Retaining Agricultural Activities Urban Pressures: A Review of Land Use Conflicts and Policies.” Policy Sciences 9 (1978): 153–78.Google Scholar
Brown, K.C., and Brown, D.J. “Heterogeneous Expectations and Farmland Prices.” American Journal of Agricultural Economics 66 (1984): 164–69.Google Scholar
Devine, T.J., and Kiefer, N.M. “The Empirical Status of Job Search Theory.” Labour Economics 1 (1993): 3–24.Google Scholar
Ellson, R., and Roberts, B. “Residential Land Development Under Uncertainty.” Journal of Regional Science 23 (1983): 309–22.Google Scholar
Ferguson, J.T. “Evaluation of the Effectiveness of Use-value Programs.” Property Tax Journal 7 (1988): 157–65.Google Scholar
Fischel, William A. “Introduction: Four Maxims for Research on Land-use Controls.” Land Economics 66 (1990): 230–35.CrossRefGoogle Scholar
Forkenbrock, David J., and Fisher, Peter S. “Tax Incentives to Slow Farmland Conversion.” Policy Studies Journal 11 (1983): 25–37.CrossRefGoogle Scholar
Furuseth, Owen J. “The Oregon Agricultural Protection Program: A Review and Assessment.” Natural Resource Journal 21 (1983): 57–70.Google Scholar
Gardner, Delworth B. “The Economics of Agricultural Land Preservation.” American Journal of Agricultural Economics 59 (1977): 1027–36.Google Scholar
Harris, Duane G., and Nehring, Richard F. “Impact of Farm Size on the Bidding Potential for Agricultural Land.” American Journal of Agricultural Economics 58 (1976): 161–69.Google Scholar
Henneberry, D.M., and Barrows, R.L. “Capitalization of Exclusive Agricultural Zoning into Farmland Prices.” Land Economics 66 (1990): 249–58.Google Scholar
Kline, J., and Wichelns, D. “Using Referendum Data to Characterize Public Support for Purchasing Development Rights to Farmland.” Land Economics 70 (1994): 233–33.Google Scholar
Kiyotaki, N., and Wright, R. “A Search-Theoretic Approach to Monetary Economics.” American Economic Review 83 (1993): 63–77.Google Scholar
Lippman, S.A., and McCall, J.J. “The Economics of Job Search: A Survey.” Economic Inquiry 14 (1976): 347–68.CrossRefGoogle Scholar
McCall, J.J. “Economics of Information and Job Search.” Quarterly Journal of Economics 84 (1970): 113–26.Google Scholar
Nelson, A.C. “Preserving Prime Farmland in the Face of Urbanization.” Journal of the American Planning Association 58 (1992): 477–88.Google Scholar
Nelson, A.C. “Economic Critique of Prime Farmland Preservation Policies in the United States.” Journal of Rural Studies 6 (1990): 114–42.CrossRefGoogle Scholar
Nelson, A.C. “Using Land Markets to Evaluate Urban Containment Programs.” Journal of the American Planning Association 52 (1986): 156–71.Google Scholar
Rose, Jerome B. “Farmland Preservation Policy and Programs.” Natural Resources Journal 24 (1984): 591–640.Google Scholar
Rothschild, M. and Stiglitz, J. “Increasing Risk I: A Definition.” Journal of Economic Theory 2 (1970): 225–43.Google Scholar
Sargent, T.J. Dynamic Macroeconomic Theory. Cambridge: Harvard University Press, 1987.Google Scholar
Shilling, J.D., Sirmans, C.F., and Guidry, K.A. “The Impact of State Land-Use Controls on Residential Land Value.” Journal of Regional Science 31 (1991): 83–92.CrossRefGoogle Scholar
Sinclair, R. “Von Thuenen and Urban Sprawl.” Annals of the Association of American Geographers 57 (1967): 72–87.Google Scholar
Stigler, G.J. “The Economics of Information.” Journal of Political Economics 69 (1961): 213–25.CrossRefGoogle Scholar
Titman, S. “Urban Land Prices under Uncertainty.” American Economic Review 75 (1985): 505–14.Google Scholar
Tavernier, E.M., and Li, F. “Effectiveness of Use-Value Assessment in Preserving Farmland: A Search-Theoretic Approach.” Journal of Agricultural and Applied Economics 27(2) (1995).CrossRefGoogle Scholar
Tavernier, E.M., and Li, F. “Information and the Formation of the Offer Price in the Farmland Market.” Department of Economics and Marketing, Rutgers University, 1994.Google Scholar
Varian, H. Microeconomics Analysis. 3d. ed. New York: W.W. Norton & Company, 1992.Google Scholar
Von Neumann, J. Jr., and Morgenstern, O. Theory of Games and Economic Behavior. Princeton: Princeton University Press, 1994.Google Scholar
White, Fred C., and Zimmer, Rod F. “Farm Real Estate Pricing Under Risk: An Empirical Investigation.” Southern Economic Journal 49 (1982): 77–87.Google Scholar