publication . Article . Preprint . 2004

A real options analysis of coffee planting in Vietnam

Loren W. Tauer; Quoc V. Luong;
Open Access
  • Published: 01 Oct 2004 Journal: Agricultural Economics, volume 35, pages 49-57 (issn: 0169-5150, eissn: 1574-0862, Copyright policy)
  • Publisher: Wiley
Abstract
Vietnam grew from an insignificant to the world’s second largest coffee producer during the 1990s. To understand this growth, this paper examines Vietnamese coffee growers’ investment decisions using real options theory. The study finds that producers, with variable costs of 19 cents/lb and total cost of 29.3 cents/lb, would enter coffee production at a coffee price of 47 cents/lb and exit at a coffee price of 14 cents/lb. Most Vietnamese growers appear to be sufficiently efficient to continue producing coffee even at relatively depressed price levels.
Subjects
free text keywords: Agronomy and Crop Science, Economics and Econometrics, Vietnam, coffee, real options, price uncertainty, irreversibility, investment, abandonment., Crop Production/Industries,, Price level, Sowing, Variable cost, Economics, Agricultural economics, Investment decisions, Real options theory, Vietnamese, language.human_language, language, Total cost
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