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Stochastic Production And Heterogeneous Risk Preferences: Commercial Fishers' Gear Choice

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Author Info
Eggert, Hakan
Tveteras, Ragnar

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Abstract

As long as total effort cannot be completely controlled, a more thorough understanding of fishers' supply response decisions will be beneficial for fisheries managers. In this paper, we present a model of fishers' gear choice, which is empirically estimated on a panel of Swedish demersal trawlers. The approach allows for heterogeneity both in production technology and in risk preferences. Stochastic revenue functions with fixed effects are estimated and used to predict expected revenue and standard deviation for each trip. We employ a linear utility function in the mean-standard deviation framework and then analyze the gear choices, using the predicted values together with vessel capacity and lagged variables for the previous trip in a random parameters- logit model, which allow for heterogeneous preferences. The results indicate that fishers have a strong tendency to choose the same gear used on the previous trip, while in general they react to changes in economic and biological conditions by responding positively to increases in expected landing and negatively to increases in the variability of the expected landing values, indicating risk aversion.

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Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2001 Annual meeting, August 5-8, Chicago, IL with number 20671.

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Date of creation: 2001
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Handle: RePEc:ags:aaea01:20671

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Keywords: Risk and Uncertainty;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Kenneth E. Train, 1998. "Recreation Demand Models with Taste Differences over People," Land Economics, University of Wisconsin Press, vol. 74(2), pages 230-239. [Downloadable!] (restricted)
  2. Kenneth Train, 2000. "Halton Sequences for Mixed Logit," Department of Economics, Working Paper Series 1035, Department of Economics, Institute for Business and Economic Research, UC Berkeley. [Downloadable!]
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  3. Dupont, D.P., 1993. "Price Uncertainty,Expectations Formation and Fishers' Allocation Choice," Working Papers 1993-1, Brock University, Department of Economics.
  4. Levy, Haim, 1989. "Two-Moment Decision Models and Expected Utility Maximization: Comment," American Economic Review, American Economic Association, vol. 79(3), pages 597-600, June. [Downloadable!] (restricted)
  5. Smith, Vernon L, 1971. "Economics of Production from Natural Resources: Reply," American Economic Review, American Economic Association, vol. 61(3), pages 488-91, June. [Downloadable!] (restricted)
  6. David Revelt & Kenneth Train, 1998. "Mixed Logit With Repeated Choices: Households' Choices Of Appliance Efficiency Level," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 647-657, November. [Downloadable!] (restricted)
  7. Harvey, A C, 1976. "Estimating Regression Models with Multiplicative Heteroscedasticity," Econometrica, Econometric Society, vol. 44(3), pages 461-65, May. [Downloadable!] (restricted)
  8. Daniel S. Holland & Jon G. Sutinen, 2000. "Location Choice in New England Trawl Fisheries: Old Habits Die Hard," Land Economics, University of Wisconsin Press, vol. 76(1), pages 133-149. [Downloadable!] (restricted)
  9. Chintagunta, Pradeep & Kyriazidou, Ekaterini & Perktold, Josef, 2001. "Panel data analysis of household brand choices," Journal of Econometrics, Elsevier, vol. 103(1-2), pages 111-153, July. [Downloadable!] (restricted)
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  11. Mistiaen, Johan A & Strand, Ivar E, 2000. " Location Choice of Commercial Fishermen with Heterogeneous Risk Preferences," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 82(5), pages 1184-90. [Downloadable!] (restricted)
  12. Eggert, Hakan & Ulmestrand, Mats, 1999. "A Bioeconomic Analysis Of The Swedish Fishery For Norway Lobster (Nephrops Norvegicus)," Marine Resource Economics, Marine Resources Foundation, vol. 14(3). [Downloadable!]
  13. Bo E. Honoré & Ekaterini Kyriazidou, 2000. "Panel Data Discrete Choice Models with Lagged Dependent Variables," Econometrica, Econometric Society, vol. 68(4), pages 839-874, July.
  14. Eales, James & Wilen, James E., 1986. "An Examination of Fishing Location Choice in the Pink Shrimp Fishery," Marine Resource Economics, Marine Resources Foundation, vol. 2(4). [Downloadable!]
  15. Pascoe, Sean & Coglan, Louisa, 2002. " The Contribution of Unmeasurable Inputs to Fisheries Production: An Analysis of Technical Efficiency of Fishing Vessels in the English Channel," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 84(3), pages 585-97, August. [Downloadable!] (restricted)
  16. Just, Richard E. & Pope, Rulon D., 1978. "Stochastic specification of production functions and economic implications," Journal of Econometrics, Elsevier, vol. 7(1), pages 67-86, February. [Downloadable!] (restricted)
  17. Dupont, Diane P., 1993. "Price Uncertainty, Expectations Formation and Fishers' Location Choices," Marine Resource Economics, Marine Resources Foundation, vol. 8(3). [Downloadable!]
  18. Meyer, Jack, 1987. "Two-moment Decision Models and Expected Utility Maximization," American Economic Review, American Economic Association, vol. 77(3), pages 421-30, June. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Eggert, Hakan & Lokina, Razack B., 2007. "Small-scale Fishermen and Risk Preferences," Marine Resource Economics, Marine Resources Foundation, vol. 22(1). [Downloadable!]
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