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Optimal Decision Rules for Selling Farmer-Owned Wheat from Storage in the Pacific Northwest

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  • Lone, Todd
  • Blakeslee, Leroy

Abstract

A stochastic dynamic programming model is developed to determine optimal decision rules for marketing white wheat from storage to the final sale. The model uses forecasts of the probability density functions for future prices; These functions are being updated each week based on current observed prices. Maximization of the of the expected utility of income from sequential decisions is used to capture the effect of risk version. Sensitivity of the optimal decision policy to risk aversion, opportunity cost of money, and storage costs is examined. The application of the model and its use in practical decision making is discussed.

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Handle: RePEc:ags:nc8191:285963
DOI: 10.22004/ag.econ.285963
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