Stochastic Production and Heterogeneous Risk Preferences: Commercial Fishers’ Gear Choices
AbstractAs long as total effort cannot be completely controlled, a more thorough understanding of fishers’ supply response decisions will be beneficial for fishery 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 allows for heterogeneous risk 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 values and negatively to increases in the variability of the expected landing values, indicating risk aversion.
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Bibliographic InfoPaper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 54.
Length: 21 pages
Date of creation: 05 Sep 2001
Date of revision:
Publication status: Forthcoming in American Journal of Agricultural Economics.
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Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden
Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/
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Risk preferences; two-moment decision models; Just-Pope production function; random-parameters logit; Swedish fisheries;
Other versions of this item:
- Eggert, Hakan & Tveteras, Ragnar, 2001. "Stochastic Production And Heterogeneous Risk Preferences: Commercial Fishers' Gear Choice," 2001 Annual meeting, August 5-8, Chicago, IL 20671, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- Q22 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Fishery
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