Representation of Farmers' Behavior under Uncertainty with a Focus-Loss Constraint

Abstract

This article presents a method for taking uncertainty into account when representing farmers' production decisions. The main assumption is that farmers maximize their profit provided that the possibility of ruin is negligible. The possibility of ruin is viewed as being closely related to Shackle's focus of loss. Results of a study incorporating the analytical apparatus developed from this assumption are given here. In the particular case of farmers in southern France, the results lend support to the proposed procedure, in spite of the arbitrariness involved in estimating some parameters, and particularly the foci of loss.