Determining the optimal selling time of cattle: A stochastic dynamic programming approach

Susana Mejia and Andres Ramirez Hassan
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Susana Mejia: Department of Economics, Universidad EAFIT, Medellín, Colombia
Andres Ramirez Hassan: Department of Economics, Universidad EAFIT, Medellín, Colombia

Agricultural Economics, 2016, vol. 62, issue 11, 517-527

Abstract: The world meat market demands competitiveness, and optimal livestock replacement decisions can help to achieve this goal. In the article, there is introduced a novel discrete stochastic dynamic programming framework to support a manager's decision-making process of whether to sell or to keep fattening animals in the beef sector. In particular, the presented proposal uses a non-convex value function, combining both economic and biological variables, and involving uncertainty with regard to price fluctuations. The methodology is very general, so the practitioners can apply it in different regions around the world. There is illustrated the model convenience with an empirical application, finding that the methodology generates better results than actions based on the empirical experience.

Keywords: decision analysis; farm management; simulation (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:caa:jnlage:v:62:y:2016:i:11:id:215-2015-agricecon

DOI: 10.17221/215/2015-AGRICECON

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