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The use of mathematical models to describe the interactions of variables is useful in modern management. In this paper, a 'mixed' model combining the knapsack problem, a household model and a form of spatial equilibrium model into a modelling framework is developed. The impacts of changes in off-farm wage rates, transaction costs in the rental market, the output prices of paddy crops, and land transactions were examined in the model. The simulation has led to the conclusion that the real benefits to farm households from land consolidation may not be apparent until the real opportunity cost of farm labour begins to rise. In addition, a reform policy in the administrative sector which encourages, not only the process of land accumulation and the rental market to be more active, but also farmers to involve themselves more actively in farming will improve their well-being. Moreover, a policy which allows farmers to freely cultivate other annual crops (cash crops) instead of rice and corn may be important and it should be considered in the future.
