Directing store flyers to the appropriate audience

Grocery shoppers were questioned about the frequency of purchasing items that were featured in the store's flyers. This measure was used as the dependent variable in a multinomial logit model with the independent variables being various aspects of shopping behaviour, usage of store flyers, age and employment status. Since only one threshold parameter was significant, the four-level dependent variable was then collapsed and a binary model was estimated. This study evidenced that less than half of the respondents looked forward to receiving unsolicited flyers. Most shoppers read the flyers only to be informed of price specials that the store has to offer. The odds ratio of responding to store flyer deals among those who look forward to sales flyers is more than double the odds ratio of those who do not await the flyers, across every category of shopping frequency. Retailers could employ direct marketing to target specific audiences who look forward to receiving store flyers.\u

Tail Dependence among Agricultural Insurance Indices: The Case of Iowa County-Level Rainfalls

Index insurance has been promoted as a cost-effective risk management alternative for agricultural producers in developing countries. In this paper, we ask whether spatially separated weather variables commonly used in index insurance design, such as rainfall at different weather stations within a defined geographical area, are more highly correlated at the tails. As a case study, we assess the degree of tail dependence exhibited by Iowa June county-level rainfalls using copulas. We search among various candidate bivariate copulas and, using goodness-of-fit for copulas, attempt to identify the copula structures that best explain the nature of dependence among rainfalls in adjacent counties. Our results provide strong evidence that lower tail dependence exists in most of adjacent county-level rainfalls in Iowa. The results also suggest that patterns of tail dependence differ across counties.tail dependence, copulas, index insurance, weather indices, Risk and Uncertainty,

THE IMPACT OF POLLUTION CONTROLS ON LIVESTOCK-CROP PRODUCERS

A discrete-time, continuous-space model of a livestock- crop producer is used to examine the long-run effects of phosphorus runoff controls on optimal livestock production and manure application practices. Quantity restrictions and taxes on phosphorus application are shown to reduce livestock supply and impose greater costs on livestock-crop producers than on crop-only producers. Restrictions on manure application, without accompanying restrictions on commercial fertilizer application, will have only a limited effect on phosphorus runoff levels.Environmental Economics and Policy, Farm Management,

Catastrophic Drought Insurance based on the Remotely Sensed Normalized Difference Vegetation Index for Smallholder Farmers in Zimbabwe

Index insurance, which indemnifies agricultural producers based on an objectively observable variable that is highly correlated with production losses but which cannot be influenced by the producer, can provide adequate protection against catastrophic droughts without suffering from the moral hazard and adverse selection problems that typically cause conventional agricultural insurance programs to fail. Using historical maize and cotton yield data from nine districts in Zimbabwe, we find that catastrophic drought insurance contracts based on the Normalized Difference Vegetation Index (NDVI) can be constructed whose indemnities exhibit higher correlations with yield losses compared to the conventional rainfall index. In addition the NDVI contracts can be offered within the 5–10 per cent premium range considered reasonably affordable to many poor smallholder farmers in Zimbabwe.Crop Production/Industries, Risk and Uncertainty,

RAINFALL INSURANCE FOR MIDWEST CROP PRODUCTION

The paper discusses a methodology for design and pricing of index insurance contracts for crop production. The methodology heavily relies on establishing a relationship between the index and yields in order to evaluate the contract performance in hedging farmers' risk. However, analysis of yield/rainfall data series for Iowa corn and Kansas wheat fail to produce a reliable and meaningful relationship which can be used uniformly across several counties and/or crop producing districts. Further research is needed as to applicability of rainfall insurance to specific crop/region combinations.Crop Production/Industries, Risk and Uncertainty,

Effects of Insurance on Farmer Crop Abandonment

Empirical evidence for the existence of moral hazard in the U.S. crop insurance program has been inconclusive. Here, we seek empirical evidence of moral hazard in the U.S. crop insurance program, departing from the established empirical literature in two significant respects. First, we attempt to uncover evidence of moral hazard by examining the effects of crop insurance on post-planting crop abandonment decisions. Second, we expand to the scope of existing empirical studies by including regions and crops that have historically experienced high loss ratios under the Federal crop insurance program. Our results provide strong evidence that insurance participation encourages producers to abandon their crops during the growing season for corn in Central Plains and Southern Plains regions and for upland cotton in Southeast, Delta States and Southern Plains regions.Farm Management, Risk and Uncertainty,

SELF-INSURANCE AND THE UTILITY OF STANDARD RISK MANAGEMENT CONTRACTS

This paper analyzes the potential trade offs and complementarities that exist between intra-year strategies employing annual price and yield risk contracts and inter-year self-insurance strategies involving intertemporal consumption substitution and borrowing, and examines whether standard crop insurance contracts can be made more useful to farmers if offered with a multiple-year horizon.Risk and Uncertainty,

MODELING MULTIVARIATE CROP YIELD DENSITIES WITH FREQUENT EXTREME EVENTS

Measuring the lower tail of a crop yield distribution is important for managing agricultural production risk and rating crop insurance. Common parametric techniques encounter difficulties when attempting to model extreme yield events. We evaluate and compare alternative models based on our candidate distributions for high risk counties.Research Methods/ Statistical Methods,

Optimal Forest Rotations with Environmental Values and Endogenous Fire Risk

This paper develops a model that solves for the optimal economic harvest rotation problem to maximize revenue of an even-aged forest plantation when there is a risk of a catastrophic forest fire. The paper also investigates the feasibility of using fire prone stands for carbon sequestration and estimates the effects that it would have on the optimal management regime and rotation age empirically using a typical Douglas-fir stand in the Pacific Northwest. The model incorporates risk-reducing management practices that allow risk and growth to be endogenous, and the optimal rotation model is solved using numerical simulation techniques. Results show that higher carbon prices increase the rotation length regardless of the probability of fire and that the frequency of risk-reducing management practices increase as the stand approaches the optimal harvest age. Results also indicate that intermediate fuel treatments can provide economical and environmental benefits, even with a high probability of fire.Carbon sequestration, Stochastic risk, Forest management, Optimal rotation, Silviculture, Forest fires, Climate change, Resource /Energy Economics and Policy,

THE EFFECTS ON PEASANT HOUSEHOLDS OF ACCESS TO FORMAL DEPOSITS AND LOANS

A dynamic, stochastic, rational expectations model of a peasant household with access to deposits and loans (up to a credit limit) is solved and simulated. If formal contracts offer more favorable rates than informal contracts, then access to formal contracts increases average consumption and decreases its standard deviation.Agricultural Finance, Consumer/Household Economics,