Valuing Farm Financial Information

and there is no established market for the selling of farm financial records.¹ In such a case, the
market value is negligible and the value of the object is established from the sentimental value.²

Figure 2 shows the change in utility for an irreplaceable good comprised solely of sentimental
value. The farmer in possession of his/her records is initially at point A. The farmer will only
forfeit his/her records to move to point C if he/she is compensated C(W) for the sentimental
value.

U b (W)

Figure 2. The utility effects of an irreplaceable good with no market value

Von Neumann-Morganstern Utility Function

The graphical content of Figure 2 can also be expressed through equations following the
insurance example by Cook and Graham (1972). The individual preference of the farmer is
expressed through the von Neumann-Morganstern utility function:

¹ We assume that these farm financial records have no value for identity fraud.

² The term sentimental value is somewhat a misnomer in the case of financial records, and a term such as
information value or personal value might be more appropriate. Sentimental value is used in accordance with the
terminology cited in other economic literature.

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