Producers' Yield and Yield Risk: Perceptions versus Reality and Crop Insurance
Egelkraut, T.M. ; Garcia, P. ; Pennings, J.M.E. ; Sherrick, B.J. - \ 2006
Using survey data from 258 Illinois corn farmers, we investigate the relationship between subjective and objective yield measures and their effect on the use of crop insurance. Our findings show that producers view themselves as better than average with respect to yields and in terms of their variability, and that over- and underconfidence also influence their use of crop insurance. The effects are not symmetric, overconfidence is primarily reflected in the larger-than-average yield, while underconfidence emerges mainly in the larger-than-average variability. Crop insurance use is further affected by risk preferences and county yield variability.
Farmers' Subjective Perceptions of Yield and Yield Risk
Egelkraut, T.M. ; Sherrick, B.J. ; Garcia, P. ; Pennings, J.M.E. - \ 2006
Using survey responses of Illinois corn farmers to differently framed yield questions, we examine their subjective information by relating stated yields and risk to the corresponding objective county measures. The results show that farm-level yields can be best characterized by soliciting probabilistic information, which provides more accurate yield assessments than an open-ended frame and consistent estimates of producers¿ subjective risk. Moreover, we find that overconfidence can be confused with differences in relevant information and that using recent data may be more appropriate in examining subjective risk statements. Our results are important for agricultural policy-makers and researchers, particularly those who work with surveys that include questions about producers¿ yields.