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Approximately Optimal Carryover Levels for Wheat in the United States
Author(s) -
Taylor C. Robert,
Talpaz Hovav
Publication year - 1979
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.2307/1239497
Subject(s) - certainty , stock (firearms) , time horizon , equivalence (formal languages) , economics , order (exchange) , econometrics , decision rule , first order , mathematics , mathematical economics , microeconomics , finance , engineering , mechanical engineering , geometry , discrete mathematics
This paper presents results of stochastic simulations of adherence to a first‐period first‐order certainty equivalence decision rule for approximately optimal wheat stocks in the United States. The decision rule is obtained by maximizing a first‐order approximation of the discounted sum of expected producers' plus consumers' surplus less storage costs over a long‐time horizon. For comparative purposes, stochastic simulations of the present system for holding stocks are also given in the paper. Stock levels under the present system were found to be higher than the certainty equivalence stock levels.