Sustainable Governance of Organic Food Production When Market Forecast Is Imprecise
Abstract
:1. Introduction
- Since forecast bias occurs often, how much of the OF producer’s profit is negatively affected?
- Because improving forecast precision is costly, a certain level of forecast bias is likely to be acceptable to OF producers. Is there a forecast bias threshold under which the OF producer can still make optimal (or near-optimal) decisions?
- It is common and reasonable for an OF producer to evaluate the risk of a decision regarding production quantity. Is it possible to analytically evaluate the OF producer’s maximum potential profit loss when he formulates production plans according to an imprecise demand forecast?
2. OF Producer’s Sustainable Production Decision Model
3. OF Producer’s Production Decision with Imprecise Demand Forecast
4. An Approach to Evaluating the OF Producer’s Maximum Profit Loss
5. Conclusions and Future Research Directions
Acknowledgments
Author Contributions
Conflicts of Interest
Abbreviations
CAGR | Compound Annual Growth Rate |
USD | United States Dollar |
OF | Organic Food |
Appendix A
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Quantity of Demand (Units) | 200 | 201 | 202 | 203 | 204 | 205 |
Probability Sector | 0.1 | 0.13 | 0.16 | 0.25 | 0.21 | 0.15 |
Candidate Solution (Units) | 200 | 201 | 202 | 203 | 204 | 205 |
Minimum Level of Forecast Bias | 2.4667 | 0.2727 | 0 | 0.087 | 1.085 | 4.3333 |
Quantity of Demand (Units) | 200 | 201 | 202 | 203 | 204 | 205 |
Probability Vector | 0.1 | 0.13 | 0.16 | 0.25 | 0.21 | 0.15 |
Range of Real Probability Vector | (0.092, 0.1087) | (0.12, 0.141) | (0.147, 0.174) | (0.23, 0.272) | (0.193, 0.228) | (0.138, 0.163) |
Forecast Bias | Candidate Solutions |
---|---|
[0, 0.087) | 202 units |
[0.087, 0.2727) | 202 units, 203 units |
[0.2727, 1.085) | 201 units, 202 units, 203 units |
[1.085, 2.4667) | 201 units, 202 units, 203 units, 204 units |
[2.4667, 4.3333) | 200 units, 201 units, 202 units, 203 units, 204 units |
[4.3333, infinity) | 200 units, 201 units, 202 units, 203 units, 204 units, 205 units |
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Han, G.; Pu, X.; Fan, B. Sustainable Governance of Organic Food Production When Market Forecast Is Imprecise. Sustainability 2017, 9, 1020. https://doi.org/10.3390/su9061020
Han G, Pu X, Fan B. Sustainable Governance of Organic Food Production When Market Forecast Is Imprecise. Sustainability. 2017; 9(6):1020. https://doi.org/10.3390/su9061020
Chicago/Turabian StyleHan, Guanghua, Xujin Pu, and Bo Fan. 2017. "Sustainable Governance of Organic Food Production When Market Forecast Is Imprecise" Sustainability 9, no. 6: 1020. https://doi.org/10.3390/su9061020