depends on the ownership structure for the slaughter plant, and all the revenues and costs for the
producer and the slaughter plant are readily calculated using the output from the producer model.
6 Results
Nash equilibrium incentive system parameters and key performance measures for
bacteriological threshold values BPREV* ∈ {0.5, 1.0, 1.5, ..., 3.5} under each of the three ownership
structures are presented in table 4. All expected performance measures are calculated using the
producer’s optimal Salmonella control policies, the plant’s optimal Salmonella control policy and the
associated steady state probabilities for each possible production history state. The dynamic
programming solution identifies an optimal control package for each production history level and a
steady state probability that a producer will be in each of the α1+ 1 possible production history states.
Multiplying the costs of the optimal control package for each state by the associated steady state
probability and summing over all α1 + 1 states yields the expected farm control cost.
Changes in the bacteriological prevalence threshold level lead to changes in control actions,
incentive parameter values, and performance results. The producer always pays for testing costs under
IOF and CHAIN ownership, and the slaughter plant pays for testing costs under COOP ownership.
Farmer cost are high and farmer certainty equivalent of gain is low under IOF ownership. The pattern
is reversed under COOP ownership, and intermediate values are taken under CHAIN ownership.
The use of farm and plant control packages changes with varying bacteriological threshold
levels, but is very similar across ownership structures. For bacteriological threshold values of 3.5% and
3.0% , the optimal producer policy always calls for control package 1. Lowering the bacteriological
plant threshold from 3.5% or 3.0% to 2.5% induces more producers to use control package 2 with strict
all-in/all-out procedures under all three ownership structures. Farm control package 2 is applied by all
17