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

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  • Eggert, Hakan
  • Tveteras, Ragnar

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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Bibliographic Info

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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  1. Meyer, Jack, 1987. "Two-moment Decision Models and Expected Utility Maximization," American Economic Review, American Economic Association, vol. 77(3), pages 421-30, June.
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  7. Bar-Shira, Ziv & Finkelshtain, Israel, 1999. "Two-moments decision models and utility-representable preferences," Journal of Economic Behavior & Organization, Elsevier, vol. 38(2), pages 237-244, February.
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  15. Dupont, D.P., 1993. "Price Uncertainty,Expectations Formation and Fishers' Allocation Choice," Working Papers 1993-1, Brock University, Department of Economics.
  16. Eggert, Håkan, 2001. "Technical efficiency in the Swedish trawl fishery for Norway lobster," Working Papers in Economics 53, University of Gothenburg, Department of Economics.
  17. Weitzman, Martin L., 2002. "Landing Fees vs Harvest Quotas with Uncertain Fish Stocks," Journal of Environmental Economics and Management, Elsevier, vol. 43(2), pages 325-338, March.
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Cited by:
  1. Nguyen, Quang, 2009. "Do fishermen have different preferences?: Insights from an experimental study and household data," MPRA Paper 16012, University Library of Munich, Germany.
  2. Eggert, Håkan & Tveterås, Ragnar, 2004. "Potential Rent and Overcapacity in the Swedish Baltic Sea Trawl Fishery," Working Papers in Economics 152, University of Gothenburg, Department of Economics.
  3. Kerri Brick & Martine Visser & Justine Burns, 2011. "Risk Aversion: Experimental Evidence from South African Fishing Communities," Working Papers 227, Economic Research Southern Africa.
  4. Martin Smith & James Wilen, 2005. "Heterogeneous and Correlated Risk Preferences in Commercial Fishermen: The Perfect Storm Dilemma," Journal of Risk and Uncertainty, Springer, vol. 31(1), pages 53-71, July.
  5. Junjie Zhang & Martin Smith, 2011. "Heterogeneous Response to Marine Reserve Formation: A Sorting Model approach," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 49(3), pages 311-325, July.
  6. Sundar, B. & Virmani, Vineet, . "Attitudes towards Risk of Forest Dependent Communities - Evidence from Andhra Pradesh," IIMA Working Papers WP2013-12-01, Indian Institute of Management Ahmedabad, Research and Publication Department.

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