Estimating the Risk of Alternate Techniques: Nitrogenous Fertilization of Rice in the Philippines

The problem investigated is how to estimate expected profits and the risk of using nitrogenous fertilizer for purposes of making fertilizer recommendations and explaining farmer decisions. Three inappropriate methods are discussed and a new method is developed which combines experimentally determined production functions with cross-section data on crop damages. For the Philippine situation analyzed, it appears that using the amount of nitrogen fertilizer which maximizes expected profits does not substantially increase the risk above low nitrogen levels. This finding casts doubt on the hypothesis that farmers' reluctance to use modern techniques is due to their aversion to risk.