The impact of yield uncertainty on planting and water-saving decisions for high water consumption crops

Abstract

In this study, we propose an optimization-simulation approach to investigate the impact of yield uncertainty on the farmer's decisions for planting high water consumption crops. In addition, the influence of the subsidy programs provided by the government has also been investigated. We consider two different subsidy programs: one is the planting acreage subsidy (PAS) program; the other is the water-saving effort subsidy (WES) program. For each program, we have derived the optimal decisions for the farmer and the government. Furthermore, we investigated the impact of yield uncertainty on the farmer's profit, consumer surplus and social welfare, by numerical experiments. We show that the PAS program can bring greater improvements to the farmer's profit, consumer surplus and social welfare than the WES program, but it leads to higher government expenditure.