Agricultural location theory and behaviors in market based on von Thunen's model

Abstract

In spite of the descriptive merit of traditional von Thunen model for agricultural land use patterns, the model's sole emphasis on the production side of the economy has not provided a realistic picture of land use and agricultural markets. By reexamining the production-oriented model, it can be shown that parameters in the model are not independent of each other. In order to incorporate the economic mechanism of agricultural markets, a closed version of the von Thunen model is proposed for a three-activity, two-dimensional economy, and equilibrium solutions are generated for prices, land areas, and outputs. The comparison of the two versions of the von Thunen model illustrates an over prediction of land use change in the production-oriented model. The closed model further includes environmental factors for an integrative perspective in agricultural location theory. This approach is extended to consider farmers' decision-making under environmental uncertainty. Farmers' decision-making, reflecting contrasting attitudes towards environmental uncertainty, is developed in three different models, both on the production side and in a closed economy. These are the maximum-expected return model, the guaranteed return model, and the behavioral model. With respect to the production side of the economy, land use is highly subject to climatic variability and crop competition, whereas price variability and stable land use result from the closed economy.