JOINT ESTIMATION OF RISK PREFERENCE STRUCTURE AND TECHNOLOGY USING EXPO-POWER UTILITY

A method is developed to permit joint estimation of risk preference st ructure, degree of risk aversion, and production technology. The metho d is implemented using the Expo-Power utility function, which imposes no restrictions on risk preference structure. The empirical applicatio n uses data from a sample of Kansas wheat farmers. Evidence rejects th e null hypothesis of risk neutrality and suggests that Kansas farmers exhibit decreasing absolute risk aversion and increasing relative risk aversion. Results also show that combined estimation of production fu nction parameters with the utility function parameter is more efficien t than is separate estimation of each.