Simulated outcomes of agricultural production decisions in the Argentine Pampas were used to examine "optimal" land allocations among different crops identified by maximization of the objective functions associated with expected utility and prospect theories. We propose a more mathematically tractable formulation for the prospect theory value-function maximization, and explore results for a broad parameter space. Optimal actions differ among some objective functions and parameter values, especially for land tenants, whose enterprise allocation is less constrained by rotations. Our results demonstrate in a nonlaboratory decision context that psychologically plausible deviations from EU maximization matter.
Podesta, G., Elke Weber, Carlos Laciana, Federico Bert, and David Letson. "Agricultural decision making in the Argentine Pampas: Modeling the interaction between uncertain and complex environments and heterogeneous and complex decision makers." In Decision Modeling and Behavior in Complex and Uncertain Environments, 57-76. Ed. T. Kugler, C.J. Smith, T. Connolly, and Y.-J. Son. New York: Springer, 2008.
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