The Von Thünen Model and Environmental Uncertainty

Abstract

Abstract In the Von Thunen model of agricultural location, land use is strictly determined by the set of initial conditions. However, under such conditions of environmental uncertainty, the pattern of land use is not predetermined, but varies according to the behavior mode of individual farmers. Elements of decision theory are used to show that a crop pattern that maximizes the long-run economic return frequently differs from the pattern that maximizes a guaranteed return each year. Secondly, although the short-run pattern produces a more stable return, the long-run pattern generates a higher average annual return. Thus, in a competitive system, conflicts emerge where farmers who can afford the higher risks dominate those unable to survive short-run fluctuations.