The impact of CAP policy in farmer’s behavior – A modeling approach using the Cumulative Prospect Theory

摘要

This paper proposes a modeling approach to evaluate the impact of economic policies on the decisionmaker’s behavior. This modeling approach incorporates the agent’s preferences, estimated through utilityelicitation methods, into the objective function of a discrete sequential stochastic programming model thatdescribes the uncertainties and the constraints faced by the decision maker. Our approach was applied to ninefarmers of Portugal. The elicitation of the farmers’ preferences reveals that the Cumulative Prospect Theoryis relevant to describe the farmers’ behavior under risk. Our programming model was used to evaluate theimpact of the Common Agricultural Policy with partial and full decoupling of subsidies