This paper examines the effects of decoupling policies on Greek cotton production with the hypothesis that producers face uncertainty regarding output prices. The authors simulate the effects on cotton production under four contrasting policy scenarios: an ‘old’ Common Agricultural Policy (CAP) regime (that is, the policy practised until 2005), a Mid-Term Review regime, a fully decoupled policy regime and a free trade–no policy scenario. The results show that, when farmers are less risk-averse, production gradually decreases as farmers' support becomes decoupled from production. On the other hand, when farmers are more risk-averse, the opposite occurs. Moreover, the fully decoupled payment policy is found not to be production-neutral, since it indirectly affects producers' decisions through the ‘wealth effect’.
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