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Model Uncertainty, Ambiguity and the Precautionary Principle: Implications for Biodiversity Management

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  • Vardas, Giannis
  • XEPAPADEAS, Anastasios

Abstract

We analyze ecosystem management under `unmeasurable' Knightian uncertainty or ambiguity which, given the uncertainties characterizing ecosystems, might be a more appropriate framework relative to the classic risk case (measurable uncertainty). This approach is used as a formal way of modelling the precautionary principle in the context of least favorable priors and maxmin criteria. We provide biodiversity management rules which incorporate the precautionary principle. These rules take the form of either safety margins and minimum safety standards or optimal harvesting under precautionary approaches.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 10236.

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Date of creation: 10 Aug 2008
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Handle: RePEc:pra:mprapa:10236

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Keywords: Knightian uncertainty; ambiguity; risk; precautionary principle; biodiversity management; optimal harvesting; robust control;

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  1. Magill, Michael J. P., 1977. "A local analysis of N-sector capital accumulation under uncertainty," Journal of Economic Theory, Elsevier, Elsevier, vol. 15(1), pages 211-219, June.
  2. Alexei Onatski & Noah Williams, 2003. "Modeling Model Uncertainty," Journal of the European Economic Association, MIT Press, MIT Press, vol. 1(5), pages 1087-1122, 09.
  3. Epstein Larry G. & Wang Tan, 1995. "Uncertainty, Risk-Neutral Measures and Security Price Booms and Crashes," Journal of Economic Theory, Elsevier, Elsevier, vol. 67(1), pages 40-82, October.
  4. Revesz, Richard L. & Stavins, Robert N., 2007. "Environmental Law," Handbook of Law and Economics, Elsevier, Elsevier.
  5. Thomas J. Sargent & LarsPeter Hansen, 2001. "Robust Control and Model Uncertainty," American Economic Review, American Economic Association, American Economic Association, vol. 91(2), pages 60-66, May.
  6. Gilboa, Itzhak & Schmeidler, David, 1989. "Maxmin expected utility with non-unique prior," Journal of Mathematical Economics, Elsevier, vol. 18(2), pages 141-153, April.
  7. Giannis Vardas & Anastasios Xepapadeas, 2007. "Uncertainty Aversion, Robust Control And Asset Holdings With A Stochastic Investment Opportunity Set," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., World Scientific Publishing Co. Pte. Ltd., vol. 10(06), pages 985-1014.
  8. Brock,W. & Xepapadeas,A., 2002. "Regulating nonlinear environmental systems under Knightian uncertainty," Working papers, Wisconsin Madison - Social Systems 8, Wisconsin Madison - Social Systems.
  9. Tisdell, Clement A., 2010. "Conservation Value," Economics, Ecology and Environment Working Papers, University of Queensland, School of Economics 90879, University of Queensland, School of Economics.
  10. Epstein, Larry G & Wang, Tan, 1994. "Intertemporal Asset Pricing Under Knightian Uncertainty," Econometrica, Econometric Society, Econometric Society, vol. 62(2), pages 283-322, March.
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Cited by:
  1. Pauline Barrieu & Sinclair Desgagné, 2009. "Economic policy when models disagree," Grantham Research Institute on Climate Change and the Environment Working Papers, Grantham Research Institute on Climate Change and the Environment 4, Grantham Research Institute on Climate Change and the Environment.
  2. Yu-Fu Chen & Michael Funke & Nicole Glanemann, 2011. "Dark Clouds or Silver Linings? Knightian Uncertainty and Climate Change," CESifo Working Paper Series 3516, CESifo Group Munich.
  3. Stergios Athanassoglou & Anastasios Xepapadeas, 2011. "Pollution Control: When, and How, to be Precautious," Working Papers, Fondazione Eni Enrico Mattei 2011.18, Fondazione Eni Enrico Mattei.
  4. Tsur, Yacov & Zemel, Amos, 2012. "Dynamic and stochastic analysis of environmental and natural resources," Discussion Papers, Hebrew University of Jerusalem, Department of Agricultural Economics and Management 120017, Hebrew University of Jerusalem, Department of Agricultural Economics and Management.
  5. Leizarowitz, Arie & Tsur, Yacov, 2012. "Renewable resource management with stochastic recharge and environmental threats," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 36(5), pages 736-753.
  6. Konstantinos Angelopoulos & George Economides & Apostolis Philippopoulos, 2012. "Public Good Provision with Robust Decision Making," CESifo Working Paper Series 3996, CESifo Group Munich.
  7. Athanassoglou, Stergios & Xepapadeas, Anastasios, 2012. "Pollution control with uncertain stock dynamics: When, and how, to be precautious," Journal of Environmental Economics and Management, Elsevier, vol. 63(3), pages 304-320.
  8. Pauline Barrieu & Bernard Sinclair Desgagne, 2009. "Economic policy when models disagree," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 37607, London School of Economics and Political Science, LSE Library.
  9. Chen, Yu-Fu & Funke, Michael & Glanemann, Nicole, 2011. "Dark Clouds or Silver Linings? Knightian Uncertainty and Climate Change," SIRE Discussion Papers, Scottish Institute for Research in Economics (SIRE) 2011-64, Scottish Institute for Research in Economics (SIRE).
  10. Hennlock, Magnus, 2009. "Robust Control in Global Warming Management: An Analytical Dynamic Integrated Assessment," Discussion Papers, Resources For the Future dp-09-19, Resources For the Future.
  11. Hennlock, Magnus, 2009. "Robust Control in Global Warming Management: An Analytical Dynamic Integrated Assessment," Working Papers in Economics, University of Gothenburg, Department of Economics 354, University of Gothenburg, Department of Economics.
  12. William Brock & Anastasios Xepapadeas & Athanasios Yannacopoulos, 2014. "Optimal Control in Space and Time and the Management of Environmental Resources," DEOS Working Papers, Athens University of Economics and Business 1402, Athens University of Economics and Business.
  13. Gren, Ing-Marie & Baxter, Peter & Mikusinski, Grzegorz & Possingham, Hugh, 2014. "Cost-effective biodiversity restoration with uncertain growth in forest habitat quality," Journal of Forest Economics, Elsevier, Elsevier, vol. 20(1), pages 77-92.
  14. Anastasios Xepapadeas & Catarina Roseta-Palma, 2013. "Instabilities and robust control in natural resource management," Portuguese Economic Journal, Springer, Springer, vol. 12(3), pages 161-180, December.

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