Risk in supply response: an econometric application

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Abstract
The impact of risk aversion on supply response is empirically estimated for selected field crops in California. As indicators of risk aversion the following surrogate variables are used: variance of past prices and yields, adjusted price to reflect the role of government support price over the market price and the dummy variables indicating price expectations. In general, the econometric estimates show a negative impact of risk aversion measured by the surrogate variables and this has implications for welfare gains resulting from price support policies aimed at stabilization.

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