Operations research in risk management and decision making in agricultural firms: The case of vegetable producers in Malaysia

Risk has been recognized as an important factor in influencing the efficiency of resource use in agriculture and the decision making process of farmers. A linear programming (LP) model has been used widely to determine the optimal farm plan but the model ignores risks in the computation. MOTAD (Minimization of Total Absolute Deviation) developed by Hazell used LP algorithm to incorporate risk and uncertainty to determine optimal farm plans. The MOTAD solutions provide a choice to decision makers determining the trade off between expected income and risk associated with it. This study illustrates the use of operations research technique in farm planning under risk. In particular the authors show that farmers’ decision making about the type of crops to plant will depend on his/her risk attitudes.