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Dynamic Decisions under Risk: Application of Ito Stochastic Control in Agriculture
Author(s) -
Hertzler Greg
Publication year - 1991
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 - 10.2307/1242441
Subject(s) - control (management) , stochastic control , stochastic calculus , agriculture , computer science , work (physics) , economics , resource (disambiguation) , optimal control , mathematical economics , econometrics , microeconomics , mathematical optimization , mathematics , artificial intelligence , stochastic partial differential equation , engineering , mechanical engineering , mathematical analysis , ecology , computer network , biology , differential equation
In agricultural economics, most studies of dynamic decisions under risk have been empirical with less emphasis on theory. In finance, resource economics, and general economics, however, Ito stochastic control is popular for theoretical work. Optimal decisions can be characterized using the powerful Ito stochastic calculus. This paper describes the assumptions and methods of Ito control, constructs a dynamic model of agricultural decisions under risk, and illustrates with four examples.