In previous chapters, the information available to an economic agent was assumed to be certain. In general, this assumption is not realistic. Market prices of commodities, supplies of limiting inputs, and technical coefficients are types of information subject to uncertainty, to either a small or large degree. Consider a farmer who, in the fall season, must plant crops to be harvested in the spring and for which a market price is not known in the fall. On the basis of his past experience, he may be able to form some expectations about those prices and use these expected prices for making his planning decisions in the fall. On the limiting input side, the effective supply of family labor may depend on seasonal weather, which is a stochastic event. Therefore, in order to proceed to form a production plan, the farmer will also have to form expectations for the uncertain quantities of limiting inputs. Technical coefficients form a third category of information that, generally, is subject to uncertainty. In any given county, agricultural extension personnel knows the “average” input requirements for producing one unit of any crop. However, when that information is transferred to a given farm, the result may not be as suggested by the extension counselor. Again, therefore, a farmermay realistically regard technical coefficients with some uncertainty.

In discussing uncertain commodity market prices, limiting inputs and technical coefficients, we admit that all the information necessary for making rational decisions by an economic agent must be subject to expectation formation about these aleatory prospects.