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Optimal Sequential Grain Marketing Decisions under Risk Aversion and Price Uncertainty
Author(s) -
Blakeslee Leroy
Publication year - 1997
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 - 10.2307/1244271
Subject(s) - skewness , risk aversion (psychology) , expected utility hypothesis , econometrics , variance (accounting) , economics , separable space , utility theory , distribution (mathematics) , mathematics , mathematical economics , mathematical analysis , accounting
A method is developed to find sequences of expected utility maximizing decisions under risk aversion when random elements are time‐dependent and additive separable utility of income is implausible. A Taylor‐series approximation to expected utility is used. In an application to marketing stored wheat, expected seasonal sales patterns, early fractional sales of total inventory for risk reduction, and negative skewness in resulting income distributions are noted. Sensitivity to the number of income distribution moments used to approximate expected utility is examined. Six moments produce a good approximation. Use of only mean and variance can give doubtful results.