Use of strategies and decision rules by Australian wool producers to manage uncertainty

Abstract

Decisions by Australian wool producers were modelled with a technique combining personal construct psychology and hierarchical decision models. Both strategic and tactical approaches were evident in wool producers' responses to the risks associated with producing and marketing their wool. Strategic responses included avoiding short to medium-term response to price changes, diversification, maintaining equity and selling wool at auction in the same sale each year. Producers identified many types of risk, with each engendering a distinctive response. Similarly the context of a decision appeared to have a major influence on the attitude to risk. Simplifying decision rules were apparent that helped producers deal with the physical, information, and processing constraints of an ambiguous decision-making environment. One implication of these results may be that prescriptive advice must recognise the importance of strategy and decision rules as a response to uncertainty and ambiguity. A second is that such advice should also take account of the influence of context on attitude to risk and ambiguity.