Tips To Make Better Decisions In A Down Market
When the stakes are higher, should you make cautious business decisions or riskier ones? The answer might surprise you.
“Five years ago, most farmers were making money, but now they are losing money,” says Ray Massey, professor and ag economist, University of Missouri Extension. “You’d think people would be more conservative. But farmers may think they need to go all out and take the risk because they are losing money.”
Loss aversion, a behavioral economics concept, explains the pain of losing is psychologically twice as powerful as the pleasure of gaining.
“You like winning and dislike losing,” Massey says. “But you dislike losing more than you like winning.” This concept can make agreements difficult to reach. “Negotiations over a shrinking pie are difficult because they require an allocation of losses, whereas an expanding pie is an allocation of gains,” Massey says. “If you conceded $25 an acre in cash rent as a landowner, you encounter a loss, and your tenant just made $25.”
Another powerful and related emotion is the endowment effect, which says people will tend to pay more to retain something they own than to obtain something new.
“Once you get something, you want to keep it,” Massey says. “Farmers retain assets, especially land, longer than they should from a purely business perspective.”
Understanding these emotions
can be advantageous for farmers as they work through lease negotiations, marketing plans and growth opportunities.
- United States CFTC USD NC net positions dipped from previous $188K to $101.3KIn Forex WorldSeptember 24, 2017
- Study Best Practices – 11 Lessons Learned – Conduct Expert SurveysIn Market TipsNovember 16, 2017
- Wynn Resorts’ $5 billion problemIn OtherFebruary 19, 2018
- Why Is Minecraft Crashing in My Computer, How Do I Fix It?In OtherNovember 16, 2017
- Fed’s Evans says need slow removal of policy accommodationIn FinanceJuly 15, 2017
- Cleaning is an service which combsIn OtherApril 9, 2018
- Auto Boom – для тех, кто хочет купить подкрылки на авто в ХарьковеIn OtherFebruary 3, 2018
- 5 Ways Tony Robbins Maximizes His Productivity and PerformanceIn ManagementAugust 24, 2017
- Why Smartphone Applications Have Become PopularIn Tech WorldFebruary 15, 2018
- See How To Obtain Minecraft Absolutely FreeIn OtherNovember 21, 2017
- Four Things That Kill Your Chances For Music Career SuccessIn OtherNovember 25, 2017
- 15 Ways to Keep Your Business Travel Expenses to a MinimumIn ManagementSeptember 24, 2017