Compensated optimal response under uncertainty in agricultural household models
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This study derives the qualitative properties of a household's optimal consumption, family labour, hired labour
and non-labour input choices under price andjor output risk through a Slutsky-type compensation without imposing
any restriction on risk preference structure or production technology. These compensated responses provide the
underpinning for welfare analysis in agricultural household models under risk. The framework for the evaluation of
welfare effects of product and factor price interventions in a setting of output and price risk is developed. The paper
also outlines an empirical model for estimation of the compensated demand and supply responses and for validation
of the paper's analytical results.