A quadratic programming model of the selected crops of Thailand

Prasit Itharattana

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: Sector analysis models have been developed in Thailand for providing policy recommendations to decision makers in the Fourth Five Year Development Plan (1977-1981) to raise the income level in the farm sector. In the agricultural sector, linear programming models with fixed estimated demand levels were constructed. The assumption of fixed level of demand will result in an error in estimating both the final level of demand and equilibrium price if the demand for the final product is not perfectly inelastic;The objective of this research is to develop a quadratic programming model of interregional competition which permits dealing with continuous demand functions rather than discrete demand quantities for rice, soybeans, and mungbeans. The model is formulated such that it can be used to determine equilibrium farm prices and quantities of selected commodities together with optimal production patterns, optimal transportation flows and net return to scarce resources;The model is composed of 19 agroeconomic zones or producing regions and four consuming regions. Homogeneity of input-output coefficients is assumed for each production region. Each production region is completely contained in some consuming region and production in the production region contributes to the supply in the consuming region in which it is located;A set of linear consumer demand functions are first specified at the national level, then the regional level functions are derived from the national level demand functions. Export and livestock and/or seed demand are treated as exogenously determined quantities to the model. Activities included in the model are crop production, transportation, capital borrowing and capital transfer activities. Resource constraints are land, labor and capital constraints. Three types of paddy land and one type of upland are defined in the model;The model is formulated as a self-dual quadratic programming problem. The objective function is to maximize the aggregate net profit of producers in the whole subject to constraints on demand for and supply of commodities, resource use, product and input prices within a market region, and interregional differences in product prices;The following items are discussed in this study as possible improvements and applications of the model: (1) estimation of the commodity demand equations in a system of equations framework, (2) incorporation of a minimum subsistence demand constraint in the model, and (3) incorporation of a price-support program to improve farm incomes.

Date: 1982-01-01
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