Published Apr 20, 2016
Gregory Yom Din


Agricultural planning models account for changing weather conditions and for high food price volatility. Applying the criteria of maximum farmer’s profit in various years enables the use of multi-criteria techniques. This paper presents the application of the Analytical Hierarchy Process (AHP) to estimate the importance of these criteria. The study contributes to the literature by a) addressing expert opinions on the importance of the criteria of profit in normal, dry years, and in years when agricultural prices rise; b) examining differences in weighting criteria between industry and academic experts; c) taking into account the loss averse behavior for these two groups of experts. Industry and academic experts were interviewed in the agricultural region of North-Eastern Israel. Changes in profit are approximated by a linear utility function with a positive slope (for both losses and gains) which is steeper for losses (profit in dry years) than for gains (profit in years when prices rise). The AHP method allows for the identification of the importance of the criteria for all respondents as a whole and for academic experts as compared to industrial experts. The share of loss averse respondents and coefficients of loss aversion are identified for both groups of experts. These coefficients are used for explaining differences between industry and academic expert opinions in estimating the criteria importance.

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AHP, farmers profit, dry year, prices rise, consistency, loss averse

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