assumptions of the model and the superior level of technolog) % Other 

 factors also influenced the results. These will now be discussed to aid 

 in planning future research efforts in this area of research and to indi- 

 cate contributions of the research to research methodology^ and 

 procedures. 



Some Limitations of the Generalized Approach 



1. The summation of linear programmed firms' supply functions 

 does not represent aggregate behavior. The normative methodology 

 assumes all farms adjust output to price in unison on the basis of profit 

 maximization. Each representative firm operates at optimum output in 

 a riskless environment and represents identical behavior for a whole 

 group of individual firms. This, of course, does not agree with reality 

 since actual farms are, at any time, in all stages of growth or adjust- 

 ment. ^^ 



2. Interfirm transactions cannot be dealt with in the micro to 

 macro buildup as long as the model firms are programmed as inde- 

 pendents. Interfirm "buy" activities of such items as hay are handled 

 separately from the "sell" activities, and there is no reason to expect a 

 balance by chance for an area. All schemes of constructing aggregate 

 constraints on total use of land, total cow numbers, and intermediate 

 products such as hay are somewhat arbitrary as long as model firms are 

 programmed independently. 



3. Representative farms and their expansion to area supply does not 

 explicitly take into account the important supply shifters associated with 

 the size of the resource base. Difficulties involve the influence of exit 

 and entry of farms in the resource base and the influence of the family 

 life cycle upon farm growth. Production goods with a longer life than 

 one production period were restricted to available credit. There is no 

 reason to expect that all firms would treat the "capital" input process 

 the same. This growth concept hinges on the "stage of life" of the firm. 

 In a micro to macro buildup, farms might better be classified in their 

 "stage of life" to see if they would expand or even replace capital assets. 



4. An aggregation error is associated with the micro to macro 

 aggregative approach to regional supply analysis. In general, some 

 method of handling aggregation error must be devised for each study. 



5. The micro to macro building process is extremely time con- 

 suming. Difficulties are encountered in developing input-output coeffi- 

 cients which are compatible and consistent with the assumption of the 

 analysis. 



19 Dr. Marvin W. Kottke defined this limitation and called it the "Rockette 

 Theory of Adjustment." 



32 



