An application of dynamic microeconomic theory to bovine tuberculosis control in New Zealand cattle

Abstract

Capital theory has been used in a wide range of economic applications to provide valuable insights into intertemporal trade-offs. This research uses an optimal control framework to model a livestock disease control problem in which there are movements of livestock into and out of a herd. Movement control regulations are important in reducing the transmission of bovine tuberculosis (Tb) between cattle herds and farming areas in New Zealand. The analysis focuses on a representative breeding-store beef cattle production system in a Tb vector risk area under mandatory movement control testing. The hypothetical producer has the objective of maximising net revenue from the cattle enterprise while being faced with control decisions concerning marketing cattle to store sale or slaughter, purchasing replacement cattle, and harvesting a wildlife Tb vector population. Non-linear programming is used to find the steady state values for the control variables. Numerical results disclose that economic incentives may exist for risk neutral producers to purchase cattle from infected herds. A major policy implication is that some form of regulatory response may be required to assist the market in transforming the price discount for cattle from infected herds from an incentive into a disincentive.