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An Application of Statistical Decision Theory to Commercial Turkey Production

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  • Vernon R. Eidman
  • Gerald W. Dean
  • Harold O. Carter

Abstract

This article provides an empirical application of Bayesian decision theory to management decisions under uncertainty. The empirical problem is one of choice between contract and independent production of turkeys. The major random variables affecting incomes are product prices and mortality rates. The optimal action is first determined where only prior probabilities of the states of nature are available. Optimal strategies are then determined where a price-forecasting model is available and posterior probabilities of the states are determined. The value of the additional information provided by the price-forecasting model is substantial. Simulated growth in firm net worth is faster and more stable when the price-forecasting model is used.

Suggested Citation

  • Vernon R. Eidman & Gerald W. Dean & Harold O. Carter, 1967. "An Application of Statistical Decision Theory to Commercial Turkey Production," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 49(4), pages 852-868.
    • Handle: RePEc:oup:ajagec:v:49:y:1967:i:4:p:852-868.
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    File URL: http://hdl.handle.net/10.2307/1236942
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    Cited by:

    1. Norton, George W., 1987. "Evaluating Social Science Research in Agriculture," Evaluating Agricultural Research and Productivity, Proceedings of a Workshop, Atlanta, Georgia, January 29-30, 1987, Miscellaneous Publication 52 50028, University of Minnesota, Agricultural Experiment Station.
    2. Norton, George W. & Alwang, Jeffrey, 1997. "Policy for Plenty: Measuring the Benefits of Policy-oriented Social Science Research," Staff Papers 232552, Virginia Polytechnic Institute and State University, Department of Agricultural and Applied Economics.
    3. Lindner, Robert K., 1987. "Toward A Framework For Evaluating Agricultural Economics Research," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 31(2), pages 1-17, August.
    4. Pope, C. Arden & Shumway, C. Richard, 1984. "Management of Intensive Forage-Beef Production Under Yield Uncertainty," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 16(2), pages 37-44, December.
    5. White, Fred C. & Eidman, Vernon R., 1971. "The Bayesian Decision Model With More Than One Predictor--An Application To The Stocking Rate Problem," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 3(1), pages 1-8, December.
    6. Musser, Wesley N., 1994. "Progress In Risk Analysis In Regional Projects," 1994 Quantifying Long Run Agricultural Risks and Evaluating Farmer Responses Risk, Technical Committee Meeting, March 24-26, 1994, Gulf Shores State Park, Alabama 271553, Regional Research Projects > S-232: Quantifying Long Run Agricultural Risks and Evaluating Farmer Responses to Risk.
    7. Lindner, Bob, 1987. "Toward A Framework for Evaluating Agricultural Economics Research," Discussion Papers 315419, University of Western Australia, School of Agricultural and Resource Economics.
    8. Jackson, Ron, 1975. "Decision Analysis And Farm Management: The Need For A New Perspective," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 43(03), pages 1-5, September.
    9. Lukin, Vladimir & Epplin, Francis M., 1999. "Value Of Soil Test Information For Crop Production," 1999 Annual meeting, August 8-11, Nashville, TN 21586, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    10. Freebairn, John W., 1978. "An Evaluation of Outlook Information for Australian Agricultural Commodities," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 46(03), pages 1-21, December.
    11. Jensen, Harald R., 1977. "PART I. Farm Management and Production Economics, 1946-70," AAEA Monographs, Agricultural and Applied Economics Association, number 337213, january.
    12. Jacobs, James J. & Held, Larry J., 1989. "A Case Analysis of Stream Flow Forecasts with Reference to Fertilizing Mountain Hay Meadows," WAEA/ WFEA Conference Archive (1929-1995) 244964, Western Agricultural Economics Association.
    13. Baker, C.B. & Barry, Peter J. & Lee, Warren F. & Olson, Carl E. & Hochman, Eithan & Rausser, Gordon S. & Kottke, Marvin W., 1977. "Economic Growth of the Agricultural Firm," Western Region Archives 260636, Western Region - Western Extension Directors Association (WEDA).
    14. Buccola, Steven T. & French, Ben C., 1977. "An E-V Analysis Of Pricing Alternatives For Long-Term Marketing Contracts," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 9(2), pages 1-7, December.
    15. Buccola, Steven T., 1980. "Supply And Demand Considerations Of Agribusiness Marketing Portfolios," 1980 Annual Meeting, July 27-30, Urbana-Champaign, Illinois 278474, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    16. Walker, Odell L. & Nelson, A. Gene, 1980. "Dealing With Risks In The Management Agricultural Firms: An Extension/Teaching Viewpoint," Risk Analysis in Agriculture: Research and Educational Developments, January 16-18, 1980, Tucson, Arizona 271561, Regional Research Projects > W-149: An Economic Evaluation of Managing Market Risks in Agriculture.

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