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Application Of The Adjusted Weak Axiom Of Profit Maximization To New Zealand Dairy Farming, Anne E. Dooley, Nicola M. Shadbolt, Koohyar Khatami, Loren W. Tauer

Journal of Applied Farm Economics

The weak axiom of profit maximization is a nonparametric, empirical approach that has been used in the United States to analyze dairy farmers’ production and profit behavior under input and output price changes to determine whether farmers effectively respond to these changes. The expectation is that profit calculated using the current year’s input and output combination will be greater than that calculated from the previous year’s combination with current prices more often than due to chance. This approach was replicated using New Zealand dairy farm data (1,785 pairs of records over five years). Current year’s profits were significantly greater in …