A STOCHASTIC MODEL OF DISASTER PAYMENTS UNDER THE 1973 FARM ACT
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A stochastic computer simulation model is used to estimate
disaster payments under the Agriculture and Consumer Protection
Act of 1973. The model uses a random yield generator and
actuarial techniques. Simulated payments under 1976 program
parameters and stochastic yields are estimated at $300 million,
compared with actual payments of $522 million in 1974 and
$262 million in 1975. A payment greater than $522 million will
probably not occur again under current conditions. The $262
million level is closer to normal expectations. The model also
evaluates the impact of revisions in the payment program, as
well as the effect of uncertain crop yields.