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Abstract
The paper presents multiple criteria approach to deal with risk in farmer’s decisions. Decision
making process is organised in a framework of spreadsheet tool. It is supported by
deterministic and stochastic mathematical programming techniques applying optimisation
concept. Decision making process is conceptually divided into seven autonomous modules
that are mutually linked up. Beside the common maximisation of expected income through
linear programming it enables also reconstruction of current production practice. Income risk
modelling is based on portfolio theory resting on expected value, variance (E,V) paradigm.
Modules dealing with risk are therefore supported with quadratic and constrained quadratic
programming. Non-parametric approach is utilised to estimate decision maker’s risk attitude.
It is measured with coefficient of risk aversion, needed to maximise certainty equivalent for
analysed farms. Multiple criteria paradigm is based on goal programming approach. In
contribution focus is put on benefits and possible drawbacks of supporting weighted goal
programming with penalty functions. Application of the tool is illustrated with three dairy
farm cases. Obtained results confirm advantage of utilizing penalty function system. Beside
greater positiveness it proves as useful approach for fine tuning of the model enabling
imitation of farmer’s behaviour, which is due to his/her conservative nature not perfect or
rational. Results confirm hypothesis that single criteria decision making, based on
maximisation of expected income, might be biased and does not necessary lead to the best -
achievable option for analysed farm.