The Optimal Season Length for a Sugar Mill in the Australian Sugar Industry

Rodney Beard and Malcolm K. Wegener

No 123762, 1999 Conference (43th), January 20-22, 1999, Christchurch, New Zealand from Australian Agricultural and Resource Economics Society

Abstract: In this paper we present a model of the optimal crushing season length for sugar cane. The approach taken is to view the optimal season length problem as an optimal stopping problem for both the Mill and a representative grower. We formulate the optimal stopping problems for both Mill and grower based on \real option" theory using Ito calculus. Because the interests of the Mill and growers do not coincide this results in a stochastic differential game of optimal stopping. We solve the model numerically using a finite difference algorithm.

Keywords: Production; Economics (search for similar items in EconPapers)
Pages: 9
Date: 1999-01
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aare99:123762

DOI: 10.22004/ag.econ.123762

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