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Stochastic Dominance, Entropy and Biodiversity Management

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  • Catherine M. Chambers

    ()
    (University of Central Missouri)

  • Paul E. Chambers

    ()
    (University of Central Missouri)

  • John R. Crooker

    ()
    (University of Central Missouri)

  • John C. Whitehead

    ()
    (Appalachian State University)

Abstract

In this paper we develop a model of population dynamics using the Shannon entropy index, a measure of diversity that allows for global and specific population shocks. We model the effects of increasing the number of parcels on biodiversity, varying the number of spatially diverse parcels to capture risk diversification. We discuss the concepts of stochastic dominance as a means of project selection, in order to model biodiversity returns and risks. Using a Monte Carlo simulation we find that stochastic dominance may be a useful theoretical construct for project selections but it is unable to rank every case.

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Bibliographic Info

Paper provided by University of Central Missouri, Department of Economics & Finance in its series Working Papers with number 0807.

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Length: 31 pages
Date of creation: May 2008
Date of revision: May 2008
Handle: RePEc:umn:wpaper:0807

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  1. Pablo Benítez & Timo Kuosmanen & Roland Olschewski & G. Cornelis van Kooten, 2004. "Conservation Payments under Risk: A Stochastic Dominance Approach," Working Papers, University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group 2004-05, University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group.
  2. Hans-Peter Weikard, 2002. "Diversity Functions and the Value of Biodiversity," Land Economics, University of Wisconsin Press, vol. 78(1), pages 20-27.
  3. Weitzman, M.L., 1991. "On Diversity," Harvard Institute of Economic Research Working Papers 1553, Harvard - Institute of Economic Research.
  4. Loomis, John B. & White, Douglas S., 1996. "Economic benefits of rare and endangered species: summary and meta-analysis," Ecological Economics, Elsevier, Elsevier, vol. 18(3), pages 197-206, September.
  5. Golan, Amos & Judge, George G. & Miller, Douglas, 1996. "Maximum Entropy Econometrics," Staff General Research Papers 1488, Iowa State University, Department of Economics.
  6. Alavalapati, Janaki R. R. & Stainback, George A. & Carter, Douglas R., 2002. "Restoration of the longleaf pine ecosystem on private lands in the US South: an ecological economic analysis," Ecological Economics, Elsevier, Elsevier, vol. 40(3), pages 411-419, March.
  7. Haim Levy, 1992. "Stochastic Dominance and Expected Utility: Survey and Analysis," Management Science, INFORMS, INFORMS, vol. 38(4), pages 555-593, April.
  8. Solow Andrew & Polasky Stephen & Broadus James, 1993. "On the Measurement of Biological Diversity," Journal of Environmental Economics and Management, Elsevier, vol. 24(1), pages 60-68, January.
  9. Wagayehu Bekele, 2005. "Stochastic Dominance Analysis of Soil and Water Conservation in Subsistence Crop Production in the Eastern Ethiopian Highlands: The Case of the Hunde-Lafto Area," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 32(4), pages 533-550, December.
  10. Montgomery Claire A. & Brown Jr. , Gardner M. & Adams Darius M., 1994. "The Marginal Cost of Species Preservation: The Northern Spotted Owl," Journal of Environmental Economics and Management, Elsevier, vol. 26(2), pages 111-128, March.
  11. Weitzman, Martin L, 1993. "What to Preserve? An Application of Diversity Theory to Crane Conservation?," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 108(1), pages 157-83, February.
  12. Simpson, R. David, 2002. "Definitions of Biodiversity and Measures of Its Value," Discussion Papers, Resources For the Future dp-02-62, Resources For the Future.
  13. Robert Innes & Stephen Polasky & John Tschirhart, 1998. "Takings, Compensation and Endangered Species Protection on Private Lands," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 12(3), pages 35-52, Summer.
  14. Martin L. Weitzman, 1998. "The Noah's Ark Problem," Econometrica, Econometric Society, Econometric Society, vol. 66(6), pages 1279-1298, November.
  15. Lueck, Dean & Michael, Jeffrey A, 2003. "Preemptive Habitat Destruction under the Endangered Species Act," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 46(1), pages 27-60, April.
  16. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, American Finance Association, vol. 7(1), pages 77-91, 03.
  17. Gardner M. Brown & Jason F. Shogren, 1998. "Economics of the Endangered Species Act," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 12(3), pages 3-20, Summer.
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