Investment Behavior of Ugandan Smallholder Farmers: An Experimental Analysis

Hanna Julia Ihli and Oliver Musshoff

No 154775, GlobalFood Discussion Papers from Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development

Abstract: In this study, we experimentally analyze the investment behavior of smallholder farmers in Uganda. We consider a problem of optimal stopping, stylizing an option to invest in a project. We ascertain whether, and to what extent, the real options approach and the classical investment theory can predict farmers’ investment behaviors. We also examine differences in the investment behavior with respect to the presence of a price floor, which is often used to stimulate investments. Furthermore, we look at learning effects. Our results show that both theories do not exactly explain the observed investment behavior. However, our results suggest that real options models better predict the decision behavior of farmers than the classical investment theory. The presence of a price floor and learning from personal experience during the experiment do not significantly affect the investment behavior. However, we find that specific socio-demographic and socio-economic characteristics affect the investment behavior of farmers.

Keywords: Farm Management; Institutional and Behavioral Economics; Political Economy; Risk and Uncertainty (search for similar items in EconPapers)
Pages: 53
Date: 2013-07
New Economics Papers: this item is included in nep-afr, nep-agr, nep-cbe, nep-exp and nep-ppm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:gagfdp:154775

DOI: 10.22004/ag.econ.154775

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