Peasants Investment, Sunk Costs and Institutional Arrangement

The paper is to analyze the peasant's investment in agricultural production in terms of sunk costs. Based on the investment model with sunk costs, it can be found that sunk costs have an adverse effect on peasants. Because of the existence of sunk costs in agriculture development, they adversely influence their investment behavior. In principle the paper provides the solutions to such problems, say, reducing the amounts of sunk costs and increasing the mobility.