The published theoretical estimates of equilibrium genetic change possible by progeny testing in dairy cattle are too high. Much of the overestimation is because no account has been taken of the temporary reduction in genetic variation due to selection of parents and ancestors. A particular efficient progeny testing scheme was modelled theoretically and simulated on computer using a continuous infinitesimal additive model. To make the simulation feasible an elite breeding herd of females was used, and progeny testing was done outside the herd. The proportional reduction in genetic variance due to previous selection was 0·25, 0·27 and 0·29 for original heritabilities of 0·05, 0·25 and 0·50, with the theoretical and simulated results being very similar. The theoretical and simulated proportional losses in equilibrium selection responses were 0·22 and 0·26, 0·21 and 0·22 and 0·21 and 0·25, respectively, for the three levels of heritability. Thus, most of the loss in response in the simulation results came from the reduction in genetic variance due to selection.