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AUSTRALIAN WHEAT STORAGE: A DYNAMIC PROGRAMMING APPROACH *
Author(s) -
Alaouze Chris M.,
Sturgess N.H.,
Watson A.S.
Publication year - 1978
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.1467-8489.1978.tb00217.x
Subject(s) - dynamic programming , rule of thumb , simple (philosophy) , economics , computer science , econometrics , mathematical optimization , agricultural engineering , microeconomics , mathematics , engineering , algorithm , philosophy , epistemology
Dynamic programming is used to examine whether Australia should store wheat for subsequent sale at higher prices. The dynamic programming model is developed assuming that the demand for Australian wheat is perfectly elastic at the world price. An important consequence of this assumption is that the algorithm used in computing the optimal policy takes a very simple form. It is concluded that interest rate and wheat price in the following season are the major determinants of storage policy. When prices are stable, rule‐of‐thumb policies, such as storing when prices are below average, are sub‐optimal.