Profit maximization in Vegetable Production in Western Usambara mountains in Tanzania: Application of Game Theory

Abstract

Vegetable production is a risky enterprise because of its susceptibility to a number of risks and uncertainties. Such risks and uncertainties include bad climatic conditions, price fluctuations, pests and diseases, land fragmentation, variability of production costs per unit of land and lack of high quality agro-chemicals. The risks and uncertainties make it difficult for farmers to make decisions on the types of vegetables to grow so as to maximize profit. The paper draws on game theory, and has two objectives: to identify categories of farmers on the basis of their risk perceptions, and to find out the types of vegetables each category of farmers grows to maximize profit. Socio-economic surveys were done to collect information on vegetable production where both input and output data were gathered together with average profits. A random sample of 103 farmers who grow vegetables was
selected in three villages in Lushoto District, Tanga region-Tazania. The maximax, regret and Laplace criteria showed that the most profitable vegetable was tomato, from which a farmer earned Tsh 871,000/=, -30,000/= and 785,000/= per 0.5 acre, respectively. The results relating to the maximin criterion showed that carrot was the most preferred crop, where a farmer earned an average of Tsh 600,000/= per 0.5 acre. The study concludes that the decisions on what type of vegetable to produce is influenced by a farmer’s characteristics and the perception of risks and uncertainties. Pessimistic farmers grow carrots and optimistic ones grow tomatoes. It is thus recommended that policy makers need to understand vegetable growers’ behaviour and perception, and uncertainties when planning to assist them so that they maximize profit.