Competitive Demand Structures under Risk in Agricultural Linear Programming Models

Abstract

Abstract A method is presented for solving agricultural sector models under risk to obtain perfectly competitive levels of outputs and prices in all product markets when producers behave according to an E, V decision criterion. The nature of market equilibrium behavior is considerably more complicated under risk than in a deterministic setting. This presents difficulties in designing models which will always provide meaningful economic answers. These difficulties are overcome by stipulating conditions under which the proposed model is applicable. The resultant model is a quadratic programming problem, and linearization techniques are suggested which enable solutions to be obtained through conventional linear programming computer codes.