Premium
RISK, UTILITY AND STOCKING RATE *
Author(s) -
McArthur I.D.,
Dillon John L.
Publication year - 1971
Publication title -
australian journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.683
H-Index - 49
eISSN - 1467-8489
pISSN - 0004-9395
DOI - 10.1111/j.1467-8489.1971.tb00073.x
Subject(s) - wool , stocking , economics , profit maximization , maximization , utility maximization , production (economics) , profit (economics) , econometrics , microeconomics , risk aversion (psychology) , expected utility hypothesis , agricultural economics , mathematical economics , zoology , history , archaeology , biology
A simple utility‐based model of risky wool production is presented. Evaluation of the model indicates the effect on optimal stocking rate of changes in the degree of risk aversion, farm area, variable cost, fixed cost, wool cut, wool price, variance of wool price, climatic variability and tax rate. It is shown that the utility hypothesis implies a lower optimal stocking rate than does expected profit maximization and hence implies a discrepancy between private and public optimal resource use which it is suggested, might be mitigated by a progressive bounty on wool production.