New policy measures have been introduced
to transform Greece’s agriculture into a more modern
and environmentally friendly agriculture. Adopting new
technology and environmentally friendly production
systems involves risk and uncertainty, which in turn
stress the need for well designed policy schemes. This
study attempts to examine the effects of income
variability upon the decision to adopt new technology
and environmentally friendly production systems by
introducing the real options analysis to dairy sheep
farming in Greece. The real options procedure revealed
that the investment in new technology in dairy sheep
farms under organic scheme is profitable. Attractive
economic incentives that are offered by the applied
agricultural policy to young farmers compensate for the
risk and uncertainty of the activity