Duane G. Harris

Impact of Farm Size on the Bidding Potential for Agricultural Land

A theoretical model is constructed to determine the maximum bid price that would be made for an acre of land by a decisionmaker with a given set of characteristics, capabilities, and expectations. The variables included that have an impact on the maximum bid price are net income, income variability, wealth, degree of risk aversion, marginal income tax rate, rate of pure time preference, and expected rate of growth in land income and prices. A numerical illustration of the model, developed for cash-grain farmers in Iowa, demonstrates the relative importance of the variables in determining bid-price differentials among farm-size classes.

An Approach to the Delineation of Rural Banking Markets

A cross-demand schedule approach is modified to develop a procedure for delineating product and service markets. Firms are classified as either rivals or nonrivals based on a statistical examination of response times to price adjustments. A test of the approach is made for the delineation of banking markets. Preliminary results indicate that the procedure may have potential for assisting policy makers in decisions regarding the competitive environment of the banking industry.

A Modeling Approach to Flows of Funds in Localized Financial Markets

tered simultaneously increases in loan demand and changes in competition and saver behavior that have increased the cost and reduced the supply of loanable funds obtained as deposits from local sources. To evaluate the impact of such changes in the competitive environment of the banking industry or in regulations that affect banking structure, it is essential to determine the impact of those changes on the flow of funds in local markets. Yet the determinants of and factors influencing funds flows within and between local markets are not well understood. Numerous studies have been completed, for example, on the implications for competition and funds flow of changes in bank structure regulations (Mote, Guttentag and Herman). Most of these studies have been descriptive, with limited recognition of either the supply of and demand for funds in various markets or the transactions costs of management constraints that would impede or encourage funds flows between markets and regions. In addition, one of the striking characteristics of these studies is the inconsistency of their results. For example, some analysts indicate that changes in branch banking or holding company regulations result in a decline in lending activity for farmers, and thus a flow of funds from rural to urban areas (Lee and Reichert, Sullivan). Others indicate that changes in bank structure result in increased lending activity with local borrowers, including farmers (Snider, Rosenblum, and Eisenbeis). Spatial allocation models that explicitly incorp rate supply and demand functions have been used widely in the agricultural sector to analyze commodity flows between various markets and geographic regions as well as the implications of government intervention on such flows (Heady and Srivastava). The purpose of this article is to examine the potential for use of spatial allocation modeling techiques to evaluate the flow of funds within and between local financial markets. The unique structural dimensions of the methodology will be reviewed, data needs for related empirical work will be discussed, and an evaluation will be presented.