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A Farm Firm Model of Machinery Investment Decisions
Author(s) -
Reid Donald W.,
Bradford Garnett L.
Publication year - 1987
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 - 10.2307/1241307
Subject(s) - interdependence , investment (military) , valuation (finance) , context (archaeology) , microeconomics , investment decisions , time horizon , production (economics) , economics , value (mathematics) , dual (grammatical number) , business , operations research , industrial organization , computer science , engineering , finance , art , paleontology , literature , politics , political science , law , biology , machine learning
This article presents a multiperiod mixed integer programming (MMIP) model of optimal machinery decisions. Infinite horizon valuation models of replacement and other investment situations are conceptualized in the context of a finite programming model. Dual properties of the MMIP model are used to identify and value opportunity costs involved in investment decisions of farm machinery. The interdependent nature of investment and production relationships necessary for solving these values emphasizes the importance of a holistic firm perspective in analyzing farm machinery investment strategies. An empirical situation is used to demonstrate model application.