Dynamic Decisions under Risk: Application of Ito Stochastic Control in Agriculture

Greg Hertzler

American Journal of Agricultural Economics, 1991, vol. 73, issue 4, 1126-1137

Abstract: 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.

Date: 1991
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