Factor Input Demand Subject to Economic and Environmental Risk: The Case of Nitrogen Fertilizer in Corn Production

Nitrogen (N) fertilizer demand in relation to economic and environmental risks associated with N-fertilizer management are examined. Both nominal and environmental damage-adjusted net returns distributions are evaluated using stochastic dominance analysis. Results suggest that, in the absence of environmental risk, N demand becomes more elastic as farmers become more risk averse. When environmental risk is introduced to the decision-making process, N demand becomes even more elastic