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Optimizing pig marketing decisions under price fluctuations

Author

Listed:
  • Reza Pourmoayed

    (Aarhus University)

  • Lars Relund Nielsen

    (Aarhus University)

Abstract

In the manufacturing of fattening pigs, pig marketing refers to a sequence of culling decisions until the production unit is empty. The profit of a production unit is highly dependent on the price of pork, the cost of feeding and the cost of buying piglets. Price fluctuations in the market consequently influence the profit, and the optimal marketing decisions may change under different price conditions. Most studies have considered pig marketing under constant price conditions. However, because price fluctuations have an influence on profit and optimal marketing decisions it is relevant to consider pig marketing under price fluctuations. In this paper we formulate a hierarchical Markov decision process with two levels which model sequential marketing decisions under price fluctuations in a pig pen. The state of the system is based on information about pork, piglet and feed prices. Moreover, the information is updated using a Bayesian approach and embedded into the hierarchical Markov decision process. The optimal policy is analyzed under different patterns of price fluctuations. We also assess the value of including price information into the model.

Suggested Citation

  • Reza Pourmoayed & Lars Relund Nielsen, 2022. "Optimizing pig marketing decisions under price fluctuations," Annals of Operations Research, Springer, vol. 314(2), pages 617-644, July.
    • Handle: RePEc:spr:annopr:v:314:y:2022:i:2:d:10.1007_s10479-020-03646-0
    DOI: 10.1007/s10479-020-03646-0
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    References listed on IDEAS

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    1. Roemen, J.H.J. & de Klein, S.J., 1999. "An optimal marketing strategy for porkers with differences in growth rates and dependent prices," Other publications TiSEM 0a7dca18-72e9-4e53-b811-a, Tilburg University, School of Economics and Management.
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