The Role of area-yield crop insurance program face to the Mid-term Review of Common Agricultural Policy

probability weighting function) differentiated for gains and for losses, in that the total
value of the game will be given by the addition of the positive and negative components
of the game. The restrictions describe the environment in that the farmers developed their
crop and livestock activities in all their components: production (crop and livestock),
financial, commercial and taxes. The different alternatives (games), derived from farmer
decisions, are assessed for the following model, with -m ≤ i ≤ s:
0s

Max V(y) = ∑h_i^- v(x_i) + ∑h_i⁺ v(x_i)                                        (7)

i=-m            i=0

subject to:

x i ∈ FD

where:

V- value of the game;

y- alternatives (games);

h- decision weights;

v- value function;

FD - opportunity set;

x i - results by state of nature; and,
s- number of states of nature (-m,..., s).

The objective function is obtained through the elicitation near the decision makers that
allow to estimate different functions. For elicitation of the value function was used the
“trade-off” method (Wakker and Deneffe, 1996), that eliminates completely the
distortions determined by the nonlinearity of the probabilities in the measure of the
utility. This method notices that the probabilities p, the reference results xR e xr (xR>xr)
and the minimum result x0 (for example: x0 ). It is asked to the decision maker which the
result x1 that turns him indifferent between the game (x1, p; xr, 1-p) and the game (x0, p;
xR, 1-p). The values p, xr, x0, e xR are fixed and the analyst varies x1 until that the

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