Abstract
AbstractA risk‐neutral stochastic dynamic programming model was used to test the certainty equivalence (CE) property in sequential decisions over a single season in a northeastern Colorado yearling operation. Stochastic rainfall represented risk in forage production, and stochastic steer prices represented marketing risk. Certainty equivalence held when cattle prices were stochastic and risk was increased as cattle sales were postponed. Intensive forage utilization as the grazing season progressed caused CE rejection at high stocking densities. High stocking densities with flexible marketing strategies had larger expected net present values than low stocking densities with fixed marketing strategies.
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