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The Optimal Season Length for a Sugar Mill in the Australian Sugar Industry

Author

Listed:
  • Beard, Rodney
  • Wegener, Malcolm K.

Abstract

In this paper we present a model of the optimal crushing season length for sugar cane. The approach taken is to view the optimal season length problem as an optimal stopping problem for both the Mill and a representative grower. We formulate the optimal stopping problems for both Mill and grower based on \real option" theory using Ito calculus. Because the interests of the Mill and growers do not coincide this results in a stochastic differential game of optimal stopping. We solve the model numerically using a finite difference algorithm.

Suggested Citation

  • Beard, Rodney & Wegener, Malcolm K., 1999. "The Optimal Season Length for a Sugar Mill in the Australian Sugar Industry," 1999 Conference (43th), January 20-22, 1999, Christchurch, New Zealand 123762, Australian Agricultural and Resource Economics Society.
  • Handle: RePEc:ags:aare99:123762
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    File URL: http://purl.umn.edu/123762
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