MEASURING AND INCORPORATING ATTITUDES TOWARD RISK INTO MATHEMATICAL PROGRAMMING MODELS: THE CASE OF FARMERS IN KAVAR DISTRICT, IRAN

This paper contributes to the literature on risk analysis in developing country agriculture by quantifying the risk attitude for a sample of the farmers from Kavar district of fars province, Iran. The Equally Likely Certainty Equivalent interview technique with imaginary payoffs was used to elicit the preference functions of farmers. It was found that all sample farmers were risk averse. However, there existed no higher risk takers in a particular village. The results of this study also suggested that risk aversion declines with farm size. The direct expected mathematical programming method was then adopted to compare the actual behavior of the representative farmers with their predicted behavior. The modeling results indicated that risk aversion, especially of small and medium farmers, has significant impacts on farmersʹ cropping decisions. Considering the high proportion of small and medium sized farms in Iran, knowledge of farmersʹ risk preferences is useful in rural development strategies and in the development and transfer of prospective technologies.