Real options theory for risk analysis and pricing of input and output on a coffee plantation in Brazil
Tipo
Artigo
Data de publicação
2012
Periódico
Custos e Agronegocio
Citações (Scopus)
0
Autores
Morozini J.F.
Martin D.M.L.
Cardoso C.E.
Martin D.M.L.
Cardoso C.E.
Orientador
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Resumo
Agricultural production be it of any nature is essentially production under conditions of risk. Soon necessarily by information asymmetry and cognitive bias is common practice to strategic errors, ie, errors that involve destruction of economic value of farming throughout his life, compromising continuity. The aim of this paper is the application of Real Options Theory, according to the model suggested by Dixit and Pindyck (1994) in the version of Luong and Tauer (2004) for determining the entry price and exit an investment project in a coffee plantation depending on market behavior. This model is underpinned by the Theory of Real Options analysis for decision making under risk. The model seeks to determine prices trigger to invest and abandon the crop due to the behavior of prices and costs of starting production, maintenance and abandonment of farming the crop. The methodology used is quantitative, seeking to show how the input and output prices are affected by the behavior of market prices over time, fixed costs, variable and time the crop establishment. Since the goal of the work involves the use of time series, it is convenient that we can use the series to present the largest number of observations. The series with the largest number of observations is published by the International Coffee Organization, denominated in cents per pound. This research showed the superiority of the real options model in contrast to empirical models of decision making by farmers and the model offered by conventional neoclassical theory regarding the determination of the points of entry and exit of the crop.