Simulation: A Tool for Farm Planning under Conditions of Weather Uncertainty

Abstract

This paper attempts to determine the optimal organization and managerial policies of a farm operating under conditions of low and unstable rainfall. This objective was accomplished by computer simulation of the decision process. The performance characteristics of various decision rules were evaluated by simulating the farm over a set of sampled sequences of years with weather events constituting the main stochastic input. Optimal decision rules were defined in terms of the present value and the coefficient of variations of the income flows. The optimal decision rules were approximated by experimental variation of their parameters. A partial factorial design was first developed in order to determine the main features of the response surface. The optimum solution was then approached by the steepest ascent procedure. It is suggested that simulation may be useful in solving more general managerial problems arising under uncertainty.

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