A Truncated Maximin Approach to Farm Planning under Uncertainty with Discrete Probability Distributions

Abstract

AbstractA method is presented for solving linear programming problems under the assumption that input‐output, restraint, and functional coefficients follow a discrete joint probability distribution. This may be a rather plausible assumption in some uncertain farm planning contexts. The objective function is formulated in terms of variance and/or expectation. Special attention is given to the most adverse outcomes with respect to both the functional value and side constraints. Parametric analysis can be used to determine trade‐offs among the functional value, the adversity level, the tolerance probability, and the probability of infeasibility. Finally, the proposed method is applied to a farm problem.