Analysis on the Decision Making of the Hanwoo Breeding Farms under Expectation Theories

Abstract

The number Hanwoo is determined by the behavior of female breeding farms. The behavior is decided by the expected farm prices. This paper analyzes the behavior of Hanwoo female breeding farms. We use four expectation theories: naive expectation, adaptive expectation, partial adjustment, and rational expectation. We compare the estimation results of these four models to see which model fits well the actual data. We estimate female slaughter function and calf supply function. The results show that the behavior of the breeding farms can be explained by the naive expectation model and rational expectation model rather than the complicated adaptive expectation model and partial adjustment model. The result of the rational expectation model shows the best goodness of fit.