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On the use of opportunity costs in deriving the economic value of herd life

Published online by Cambridge University Press:  02 September 2010

A. F. Groen ,
J. A. M. van Arendonk ,
M. E. Goddard  and
A. R. Vollema
A. F. Groen
Affiliation:
Division of Animal Breeding and Genetics, Wageningen Institute of Animal Sciences, PO Box 338, 6700 AH Wageningen, The Netherlands
J. A. M. van Arendonk
Affiliation:
Division of Animal Breeding and Genetics, Wageningen Institute of Animal Sciences, PO Box 338, 6700 AH Wageningen, The Netherlands
M. E. Goddard
Affiliation:
Animal Genetics and Breeding Unit, University of New England, NSW, Australia
A. R. Vollema
Affiliation:
Division of Animal Breeding and Genetics, Wageningen Institute of Animal Sciences, PO Box 338, 6700 AH Wageningen, The Netherlands
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Abstract

This paper presents the economic perspectives applied when either using or not using opportunity costs of postponed replacement in deriving the economic value of herd life. Results show the equivalence of the rescaling method and the correction for opportunity costs. In economic terms, using rescaling or correction for opportunity costs forces the value of genetic improvement to change from revenues of increased output to reduction of costs per unit of (fixed) ouput. Under the zero profit theory, the economic value of herd life is equal when either using or not using correction for opportunity costs. In deriving economic values to define breeding goals, the choice of a method and price parameters will have to depend on foreseen future production circumstances for the system under study.

Keywords

economic valueopportunity costsproductive life
Type
Research Article
Information
Animal Science , Volume 65 , Issue 3 , December 1997 , pp. 335 - 341
Copyright
Copyright © British Society of Animal Science 1997

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