Decision Behavior of Farmers’ on Adoption of Price Risk Management: Structure Equation Modeling Approach

Abstract

The purpose of this paper is to examine the interrelationships among the extracted constructs of Farmers’ Decision Behavior (FB), Farmers’ Attitude (FA), and Farmers’ Objective (FO), Economic Freedom (EF), Market Orientation (MO). The conceptual framework is developed based on previous studies and behavioral theories. To address a lack of comprehensive evaluation of farmers' decision behavior, this study extracted the dimensions of decision behavior and used them in the structural model. The conceptual model is tested using a structural equation modeling approach using the maximum likelihood estimation technique. A sample of 409 cotton farmers' from Telangana state, India was used to test the hypothesized relationships among the constructs. The key findings of this study reveal that FA has the most important construct on FB (FB→FA). The next important construct was found to be the EF (FB→EF). The relationship between FO, MO, and FB and FB, MO was revealed to be significant (FA→ FO) (FA→ MO) (FA→ EF) (FO→EF) (FB→FO) (FB→MO) (FO→MO) (MO→EF). This study reveals the fact that the (FO→EF) was not significant and the research enables the design of new methods and concentrated areas to achieve higher adoption rates in risk management practices by farmers.