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Selecting Among Alternative Depreciation Methods: A Stochastic Dominance Approach

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  • Richardson, James W.
  • Nixon, Clair J.

Abstract

A whole-firm simulation model (FLIPSIM V) was used to simulate the net present value probability distributions for sixteen alternative tax strategies on equipment depreciation for a rice farm in Texas. Stochastic dominance was used to determine the utility maximizing tax strategy for decision makers in alternative risk preference classes. The most preferred income tax strategy for both risk loving and averse decision makers utilized straight-line cost recovery, Section 179 expensing, maximum I.T.C. with resulting basis reduction, and trade rather than sell on disposition of old equipment.

Suggested Citation

  • Richardson, James W. & Nixon, Clair J., 1983. "Selecting Among Alternative Depreciation Methods: A Stochastic Dominance Approach," 1983 Annual Meeting, July 31-August 3, West Lafayette, Indiana 279113, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea83:279113
    DOI: 10.22004/ag.econ.279113
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    References listed on IDEAS

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    1. Lemieux, Catharine M. & Richardson, James W. & Nixon, Clair J., 1982. "Federal Crop Insurance Vs. Ascs Disaster Assistance For Texas High Plains Cotton Producers: An Application Of Whole-Farm Simulation," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 7(2), pages 1-14, December.
    2. Hadar, Josef & Russell, William R, 1969. "Rules for Ordering Uncertain Prospects," American Economic Review, American Economic Association, vol. 59(1), pages 25-34, March.
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    Cited by:

    1. Lowenberg-DeBoer, James & Boehlje, Michael, 1987. "The Distributional Impact Of 1981 And 1982 Federal Income Tax Legislation: Which Farmers Benefit?," Northeastern Journal of Agricultural and Resource Economics, Northeastern Agricultural and Resource Economics Association, vol. 16(1), pages 1-10, April.

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