J. Anim Sci.
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J. Anim Sci. 1980. 50:821-827.
© 1980 American Society of Animal Science
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Application of Utility Functions to Results of a Crossbreeding Experiment1

M. Schneeberger2 and A. E. Freeman3

Iowa State University, Ames 50011

Abstract

Four types of utility or risk return preference functions were applied to data from a crossbreeding experiment with European dual purpose and beef cattle breeds: two quadratic utility functions representing risk aversion and risk prone; a cubic utility function that was both risk averse and risk prone, and a lexicographic utility function. The lexicographic utility function had two goals that specify and assign individual priorities. The first priority goal was risk aversion; specifically, the probability of obtaining a monetary return of ≥0 had to be ≥.9. The second priority goal was maximization of expected monetary value. Considerable changes in the ranking of the breeds occurred when the cubic and the lexicographic utility functions rather than monetary values only, were applied. It seemed that the Swiss farmers' actual evaluation of the risk of losing money because of difficult calvings and still births could be described better by application of the cubic or the lexicographic utility function than by use of the monetary values only. Utility functions can be helpful in dealing with situations in which risk needs to be taken into account.

Footnotes

1 Dr. F. Weber (now deceased) presented in seminar some of the ideas in this paper, without quantitating them, following discussion with the second author. The suggestions of Dr. M. D. Boehlje in preparing this manuscript are appreciated.

2 Inst. of Anim. Prod., Swiss Federal Inst. of Technol., Zurich.

3 Dept. of Anim. Sci., Iowa State Univ., Ames 50011.






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