IS THE "STANDARD REAL OPTIONS APPROACH" APPROPRIATE FOR INVESTMENT DECISIONS IN HOG PRODUCTION?

Applications of the real options approach hardly consider investment returns to be the result of competitive markets such as markets for agricultural products. The reason is probably that Dixit and Pindyck (1994, ch. 8) show in their very popular book "Investment under Uncertainty" that the investment triggers of firms in competitive markets are equal to those of firms with exclusive options. In this study, however, it is shown that this result is restricted to markets in which assets have infinite lifetime. If assets are subject to depreciation and subsequent reinvestment opportuni-ties, competition leads to significantly lower investment triggers. The reason is that depreciation of replaceable assets allows to compensate the potential decline in returns after negative demand shocks because of the non-replacement of depreciated assets. Accordingly, applications of the real options approach to investments in e.g. pig production should consider this effect. The results are obtained by an agent-based simulation approach in which a number of competing firms derive their investment triggers by a genetic algorithm. Since this method allows to understand the re-sulting price dynamics, an alternative method is presented that allows to simulate the identified price dynamics directly and which also can be used to determine investment triggers for specific conditions.Livestock Production/Industries,

Multi-level processes of integration and disintegration. Proceedings of the Third Green Week Scientific Conference

CONTENTS: ACKNOWLEDGEMENTS ... I; ABOUT THE MACE PROJECT... III; PLENARY PRESENTATION ... 1; Landscape agroecology: Managing interactions between agriculture, nature and socio-economy... 3, Tommy Dalgaard; DEVELOPMENT CHALLENGES IN RURAL AREAS ... 13; Patterns of rural development in mountainous areas of the Mediterranean: Between innovation and tradition ... 15, Angela Guarino; Agro ecology: Hypothesis for a sustainable local development?... 22, Silvia Doneddu; The farmers' early retirement scheme as an instrument of structural changes in the rural areas after Poland's accession to the EU ... 29, Michal Dudek; FOOD MARKETS AND AGRICULTURAL MARKETING... 37; G/Local brand challenges in the Austrian agricultural food market ... 39, Bernadette Frech, Ana Azevedo, Hildegard Liebl; Willingness of food industry companies to co-finance collective agricultural marketing actions... 48, Anikó Tóth, Csaba Forgács; MULTIFUNCTIONAL AGRICULTURE ... 57; The role of multifunctional agriculture for rural development in Bulgaria... 59, Violeta Dirimanova; A methodological review of multifunctional agriculture ... 66, Concettina Guarino, Francesco Di Iacovo; A spatially explicit decision-making support tool for integral rural development ... 75, Catherine Pfeifer, Jetse Stoorvogel; AGRICULTURAL EXTENSION AND NETWORKS IN RURAL AREAS... 89; Feasibility and implementation strategies of dairy extension in Ulaanbaatar/Mongolia... 91, Baast Erdenebolor, Volker Hoffmann; The relevance of social networks for the implementation of the LEADER programme in Romania ... 99, Doris Marquardt, Gertrud Buchenrieder, Judith Möllers; Quality assessment problems of agricultural advisory centres' services... 113, Gunta Grinberga; INTEGRATION PROCESSES INTO INTERNATIONAL MARKETS... 125; Competition or market power in the Ukrainian meat supply chain? ... 127, Andriy Matyukha, Oleksandr Perekhozhuk; Integration of the Hungarian cereal market into EU 15 markets ... 138, Attila Jambor; Regional specialisation of agriculture and competitive advantages of East-European countries... 146, Oleksandr Zhemoyda, Stephan J. Goetz; GOVERNANCE AND USE OF NATURAL RESOURCES ... 155; An analysis of biodiversity governance in the Kiskunság National Park according to the GoverNat Framework... 157, Cordula Mertens, Eszter Kelemen, György Pataki; Hierarchical network modelling and multicriteria analysis for agri-environmental measures in Poland ... 168, Jadwiga Ziolkowska; Assessing rural livelihood development strategies combining socioeconomic and spatial methodologies ... 179, K.C. Krishna Bahadur; SUSTAINABLE AGRICULTURAL LAND USE... 189; Linking economic and energy modelling with environmental assessment when modelling the on-farm implementation of Anaerobic Digestion ... 191, Andreas Muskolus, Andrew M. Salter, Philip J. Jones; Phytoremediation of a heavy metal-contaminated agricultural area combined with energy production. Multifunctional use of energy maize, rapeseed and short rotation crops in the Campine (BE)... 200, Nele Witters, Stijn Van Slycken, Erik Meers, Kristin Adriaensen, Linda Meiresonne, Filip Tack, Theo Thewys, Jaco Vangronsveld --

DOING POLICY IN THE LAB! OPTIONS FOR THE FUTURE USE OF MODEL-BASED POLICY ANALYSIS FOR COMPLEX DECISION-MAKING

For models to have an impact on policy-making, they need to be used. Exploring the relationships between policy models, model uptake and policy dynamics is the core of this article. What particular role can policy models play in the analysis and design of policies? Which factors facilitate (inhibit) the uptake of models by policy-makers? What are possible pathways to further develop modelling approaches to better meet the challenges facing agriculture today? In this paper, we address these issues from three different points of view, each of which should shed some light on the subject. The first point of view discusses models in the framework of complex adaptive systems and uncertainty. The second point of view looks at the dynamic interplay between policies and models using the example of modelling in agricultural economics. The third point of view addresses conditions for a successful application of models in policy analysis.modelling, complexity, participatory modelling, policy analysis, model use, Agricultural and Food Policy, Research Methods/ Statistical Methods,

Real Options and Competition: The Impact of Depreciation and Reinvestment

International Relations/Trade,

Does vertical integration reduce investment reluctance in production chains? An agent-based real options approach

This paper uses an agent-based real options approach to analyze whether stronger vertical integration reduces investment reluctance in pork production. A competitive model in which firms identify optimal investment strategies by using genetic algorithms is developed. Two production systems are compared: a perfectly integrated system and a system in which firms produce either the intermediate product (piglets) or the final product (pork). Simulations show that the spot market solution and the perfectly integrated system lead to a very similar production dynamics even with limited information on production capacities. The results suggest that, from a pure real options perspective, spot markets are not significantly inferior to perfectly integrated supply chains.real options, supply chain, agent-based models, genetic algorithms, Agribusiness, Agricultural and Food Policy, Agricultural Finance, Institutional and Behavioral Economics, Productivity Analysis,

Structural, efficiency and income effects of direct payments: an analysis of different payment schemes for the German region 'Hohenlohe'

The objective of this paper is to work out some fundamental dynamic effects on agricultural structure, farm incomes, and efficiency that result from decoupled income payments, the transfer of payments together with a progressive payment cut. To do so, we apply the agent-based model AgriPoliS (Agri-cultural Policy Simulator). AgriPoliS is a normative spatial and dynamic model of regional agricul-tural structures that takes account of actions and interactions between a large number of individually acting farms. The model is calibrated to the region 'Hohenlohe' in Baden-Württemberg which is char-acterised by intensive livestock farming on the plains and extensive cattle and dairy farming in more remote valleys. The policy simulations show that impacts on structural change, competitiveness, and income distribution vary greatly depending on how the policy scheme is implemented. If direct pay-ments are completely decoupled from land use (no obligation to farm land) this has significant and lasting effects on the competitiveness of agriculture, structural change, farmers’ incomes and land-use.agricultural policy analysis, agent-based models, decoupling

LAND MARKETS IN AGENT BASED MODELS OF STRUCTURAL CHANGE

Replaced with revised version of paper 02/22/08.Land Economics/Use, Research Methods/ Statistical Methods,

WINNERS AND LOSERS OF POLICY CHANGES – WHAT IS THE ROLE OF STRUCTURAL CHANGE?

In this paper several decoupling options are evaluated concerning their impact on structural change especially on farm incomes and their surviving. Therefore, the agent-based model AgriPoliS was used and extended to account the income of leaving farms. This enables the comparison of future incomes of leaving and surviving farms to find out whether leaving farms are losers or not. The disaggregated analysis of farms’ household incomes showed that leaving farmers even benefit from their decision in case that enough off-farm jobs are available. Losers are farms that would have left agriculture under conditions of the Agenda 2000. After decoupling they stay in the sector and cannot increase their income as much as under Agenda conditions. Furthermore, the analysis displayed a persistence of farms in the sector despite it would have been more profitable for them to quit agriculture.Structural change, decoupling, agent-based modeling, Common Agricultural Policy, Agricultural and Food Policy, Consumer/Household Economics, Farm Management,

The agricultural policy simulator (AgriPoliS): an agent-based model to study structural change in agriculture (Version 1.0)

A central criticism common to agricultural economic modelling approaches for policy analysis is that they do not adequately take account of a number of characteristic factors of the agricultural sector. This concerns aspects like the immobility of land, heterogeneity of farms, interactions between farms, space, dynamic adjustment processes as well as dynamics of structural change. In brief, modelling the complexity of the system has not been at the centre of interest. In terms of modelling complex economic systems, an agent-based modelling approach is a suitable approach to quantitatively model and understand such systems in a more natural way. In the same way, this applies to the modelling of agricultural structures. In particular, agent-based models of agricultural structures allow for carrying out computer experiments to support a better understanding of the complexity of agricultural systems, structural change, and endogenous adjustment reactions in response to a policy change. This paper presents the agent-based model AgriPoliS (Agricultural Policy Simulator) which simultaneously considers a large number of individually acting farms, product markets, investment activity, as well as the land market, and a simple spatial representation. The ultimate objective of AgriPoliS is to study the interrelationship of rents, technical change, product prices, investments, production and policies, structural effects resulting from these, the analysis of the winners and losers of agricultural policy as well as the costs and efficiency of various policy measures. -- G E R M A N V E R S I O N: Ein oft genannter Kritikpunkt an vielen agrarökonomischen Politikanalysemodellen ist, dass diese nur ungenügend Bezug nehmen auf Aspekte wie die Immobilität von Boden, Heterogenität der Akteure, Interaktionen zwischen Betrieben, räumliche Bezüge, dynamische Anpassungsprozesse und Strukturwandel. Kurz, die Modellierung komplexer Wirkungszusammenhänge steht weniger oder nicht im Zentrum des Interesses. Agentenbasierte Modelle stellen einen Weg dar, das Verständnis komplexer ökonomischer Zusammenhänge zu verbessern bzw. zu quantifizieren. Insbesondere erlauben sie die Durchführung von einer Vielzahl von Computerexperimenten, mit denen Fragestellungen wie der Zusammenhang zwischen Politikmaßnahmen und Strukturwandel untersucht werden können. Basierend darauf, stellt dieser Beitrag das agentenbasierte Modell AgriPoliS (Agricultural Policy Simulator) vor. AgriPoliS ist ein räumlich-dynamisches Modell einer Agrarstruktur, in dem eine Vielzahl individuell abgebildeter landwirtschaftlicher Unternehmen in einer vereinfacht dargestellten Agrarregion agiert und beispielsweise um begrenzt verfügbare landwirtschaftliche Flächen konkurriert.Agent-based systems,Multi-agent systems,Policy analysis,Structural change,Simulation,Agentenbasierte Systeme,Politikanalyse,Multi-Agentensysteme,Strukturwandel,Simulation

Beiträge des 2. Doktorandenworkshops zur Agrarentwicklung in Mittel- und Osteuropa 2004

Dieses Discussion Paper enthält die Kurzfassungen der Beiträge, die im Rahmen des Workshops zur Agrarentwicklung in Mittel- und Osteuropa für Doktoranden und Post-Doc’s vorgestellt und diskutiert werden sollen. Dieser Workshop findet nach der erfreulichen Reso-nanz im vergangenen Jahr nun zum zweiten Mal, vom 17. bis 19. Juni 2004, am IAMO statt, wobei die Anzahl der eingereichten Beiträge noch über dem Wert des Vorjahres lag. Ziel der Veranstaltung ist es, Nachwuchswissenschaftlern die Möglichkeit zu geben, Ihre Forschungs-vorhaben zu präsentieren und zu diskutieren. Die folgenden Kurzfassungen sollen allerdings nicht nur als Diskussionsgrundlage für den Workshop dienen, sondern auch einen Querschnittsüberblick über die gegenwärtige Nach-wuchsforschung im Agrarbereich zu Mittel- und Osteuropa vermitteln. Wir denken, dass ein breites Spektrum von relevanten Themen bearbeitet wird. Dies entspricht einerseits dem in-terdisziplinären Ansatz in der Agrarökonomie, andererseits zeigt es, dass die Diskussion mit Nachbarwissenschaften wie Politikwissenschaften oder Geographie fruchtbar geführt werden kann. Hervorzuheben ist weiterhin der hohe Anteil von Wissenschaftlern aus dem europäi-schen Ausland, die am Workshop teilnehmen. Dieser Umstand dokumentiert die europäische Dimension des Themas und unterstreicht die Rolle des IAMOs als Forum des wissenschaftli-chen Austausches. Wir wünschen uns, dass der Workshop zur Agrarentwicklung in Mittel- und Osteuropa für Doktoranden und Post-Doc’s zu fruchtbaren Diskussionen anregt und hoffen, dass die vorlie-gende Zusammenstellung dazu beiträgt, den Erfahrungsaustausch auch über den engeren Kreis der unmittelbar Beteiligten hinaus zu fördern. -- E N G L I S H V E R S I O N: This Discussion Paper contains the contributions to be presented at the "Workshop zur Agrar-entwicklung in Mittel- und Osteuropa für Doktoranden und Post-Doc’s" to take place at IAMO from 17 to 19 June 2004. After last year’s positive resonance, the workshop is held for the second time with an increased number of contributions. It is the aim of the event to give young scientist the opportunity to present and discuss their research. The following short versions of the contributions shall not only serve as a basis for discussion during the workshop, but also offer a cross-sectional overview of current research on agricul-ture in Central and Eastern Europe done by young scientists. We think a broad spectrum of topics is covered. On the one hand, this is due to the interdisciplinary approach in agricultural economics, on the other hand, it shows that stimulating exchange with neighbouring disciplines such as political science or geography is possible. We also want to stress the significant con-tribution of scientists originating from European countries other than Germany, which docu-ments IAMO’s role as a forum of scientific exchange. It is our hope that the "Workshop zur Agrarentwicklung in Mittel- und Osteuropa für Dokto-randen und Post-Doc’s" stimulates fruitful discussion and that the current compilation fosters exchange beyond those immediately involved in the workshop.