Theoretical and Empirical Approaches to Program Selection within the Feeder Cattle Enterprise

Abstract

S TIMULATED by von Neumann and Morgenstem's, Theory of Games and Economic Behavior, and a recognition of the importance of risk and uncertainty, much theoretical work has been done in developing a mathematical framework for decision making in economic situations.' Some laboratory type experiments have also been made.2 However, few empirical analyses involving these procedures have yet been published.3 The mathematical framework appears to have been overemphasized to the neglect of realities, or more fairly, the economists have not kept up with the mathematicians. This paper considers a real situation. The example shows that for a broad class of situations involving competitive market transactions, the decision problem can and should be posed in a simpler way than as an n-person game. The avenue of presentation in through the decision problems facing an individual farmer in the selection of alternatives within his feeder cattle enterprise in a given season. Direct concern is not given to the total number of cattle to be purchased but to the types of cattle feeding programs and their relative proportions. Given prevailing conditions of uncertainty, the question of total number is more relevant to the relation between the beef and other enterprises. Moreover, the decision models are set up for the planning situation of the farmer and not the specific market situation which he faces when he actually enters a buying or selling market. So far as space permits, empirical data will be introduced to enable comparisons to be made between the assumptions of the mathematical decision structures and the behavior of an actual group of farmers. The data refer to 77 out of 97 owner operators of three years standing between the ages of 30 and 50 in Marshall County, Iowa, who had fed an average of at least 25 feeder cattle in each of the three seasons prior to 1957-1958. Discussions were had with each farmer in June, August and October of 1957 and (by mail) in January, 1958.