When to Get In and Out of Dairy Farming: A Real Option Analysis Report as inadecuate




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The Dixit entry/exit real option model was applied to the entry/exit decisions of New York dairy farmers. For the cost structure of a 500-cow farm the entry milk price is $17.52 per hundredweight (cwt.) and the exit milk price is $10.84. For the 50-cow farm cost structure the entry price is higher at $23.71 per cwt., and the exit price is also higher at $13.48. If infinite numbers of representative farms enter and exit at these prices, the price of milk should range between $13.48 and $17.52 per cwt.

Keywords: Dairy farming ; entry-exit ; investment ; real options

Subject(s): Farm Management

Issue Date: 2006

Publication Type: Conference Paper/ Presentation

PURL Identifier: http://purl.umn.edu/21251

Total Pages: 24

Series Statement: Selected Paper

Record appears in: American Agricultural Economics Association (AAEA) > 2006 Annual meeting, July 23-26, Long Beach, CA





Author: Tauer, Loren W.

Source: http://ageconsearch.umn.edu/record/21251?ln=en



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