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Sequential Decision Making in Production Models
Author(s) -
Antle John M.
Publication year - 1983
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 - 10.2307/1240874
Subject(s) - production (economics) , context (archaeology) , estimator , optimal control , mathematical optimization , econometrics , stochastic modelling , computer science , mathematics , mathematical economics , economics , statistics , microeconomics , paleontology , biology
Single equation estimates of production models usually are justified by the assumption that production inputs are chosen as part of a one‐period decision problem. Yet, most production decisions in agriculture are made sequentially. In this paper the farmer's optimal input choices are modeled as optimal controls in a stochastic control problem. A two‐period Cobb‐Douglas example is used to show that sequential solutions to production problems may yield models which require either single equation or simultaneous equation estimators. Functional separability, stochastic specification, and behavior under uncertainty are discussed in the context of dynamic production models.