The Value of Variable Rate Technology: An Information-Theoretic Approach

We present a theoretical treatment of the economics of variable rate technology and its interplay with information. The framework facilitates description of on-farm empirical profitability studies of variable rate nitrogen application on Illinois cornfields. We estimate site-specific ex ante economically optimal nitrogen application rates, and the value of site-specific information in the management of variable rate technology. We find that with site-specific information provided free, variable rate nitrogen application would have been profitable in six of eight fields. Because private markets are unlikely to provide such information sufficiently, more public funding of long-term, multiregion, multiyear experimentation is appropriate.