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Journal Article

Flat Earth Economics: The Far-Reaching Consequences of Flat Payoff Functions in Economic Decision Making

David J. Pannell
Review of Agricultural Economics
Vol. 28, No. 4 (Winter, 2006), pp. 553-566
Stable URL: http://www.jstor.org/stable/3877202
Page Count: 14
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Flat Earth Economics: The Far-Reaching Consequences of Flat Payoff Functions in Economic Decision Making
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Abstract

Economists tend to emphasize the optimum, but in many cases, even large deviations from optimal decisions make little difference to the payoff. This has far-reaching implications that are under-recognized, including: (a) decision makers often have a wide margin for error in their production planning decisions, and flexibility to pursue factors not considered in the calculation of payoffs; (b) optimizing techniques are sometimes of limited practical relevance for decision support; (c) the value of information used to refine management decisions is often low; and (d) the benefits of using "precision farming" technologies to adjust production input levels are often low.

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