Agricultural Risk Aversion Revisited: A Multicriteria Decision-Making Approach

Abstract

In modelling farm systems it is widely accepted that risk plays a central role. Furthermore, farmers' risk aversion determines their decisions in both the short and the long run. This paper presents a methodology based on multiple criteria mathematical programming to obtain relative and absolute risk aversion coefficients. We rely on multiattribute utility theory (MAUT) to elicit a separable additive multiattribute utility function and then estimate the risk aversion coefficients and apply this methodology to an irrigated area of Northern Spain. The results show a wide variety of attitudes to risk among farmers, who mainly exhibit decreasing absolute risk aversion (DARA) and constant relative risk aversion (CRRA).Risk analysis, Agriculture, Utility theory, Multiple criteria analysis, Risk and Uncertainty,