Application of Portfolio Theory in investigating the effect of farmers' risk preferences on the cropping pattern and water productivity in Nazarabad County

Fatemeh Mirmohammadi ¹ ( M.Sc student of Agricultural Economics, Sari Agricultural Sciences and Natural Resources University )
Fatemeh Kashiri Kolaei ² ( Assistant Professor of Agricultural Economics, Sari Agricultural Sciences and Natural Resources University )
Somayeh Shirzadi ³ ( Assistant Professor of Agricultural Economics, Sari Agricultural Sciences and Natural Resources University )

Submited date : 2024-09-15 Accepted date : 2024-12-13

Keywords: Risk minimization, Water economical efficiency , Quadratic risk programming, Risk aversion,

Abstract :

 

Production in the agricultural sector as a provider of the food needs of society faces various risks. Due to the limitation of production resources such as water, the necessity of aligning production in this sector with the risk preferences of farmers and optimal use of inputs is felt. In this research, using the portfolio theory, the effect of farmers' risk preferences on the cultivation pattern and the physical and economic water productivity of Nazarabad county has been investigated.

 In this study, the quadratic risk planning model has been used with the aim of minimizing the risk and at the same time maximizing the expected return of the portfolio. The required statistics and information have been collected by referring to the Agricultural Jihad Center of the study area and the website of the Ministry of Agricultural Jihad for the crop year 2021-2022. 

 The results showed that in the second-order risk model, with the increase of risk aversion, the cultivated area of ​​less risky crops such as potatoes increases, while the cultivated area of ​​high-risk crops such as barley decreases. Also, in the case of high risk aversion, the cucumber crop has also entered the cultivation pattern. By changing the cultivation pattern in different scenarios of risk aversion, the physical and economic productivity of water has also changed so that with the increase of risk aversion, physical productivity has increased, while economic productivity has increased first and in High risk-aversion has faced a decline.

 

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