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The role of uncertainty and expectations in modeling (range)land use strategies: An application of dynamic optimization modeling with recursion

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  • Domptail, Stéphanie
  • Nuppenau, Ernst-August

Abstract

This paper presents a bio-economic optimization modeling approach for the simulation of land use decision making by farmers faced with climatic uncertainties. The approach is applied to the study of land use strategies on commercial ranches in Namibia. First, we compare two models differing in their structure: the first one is an inter-temporal optimization model (forward-looking with perfect foresight) while the second is recursive and it explicitly incorporates uncertainty in the decision making process. Second, we point out the structural advantage of the recursive optimization model in its ability to simulate how decision makers' perceptions on the occurrence of stochastic events alter land use strategies and their economic and ecological outcomes. Both models make use of a State-and-Transition conceptual framework to depict the bio-economic feedback. We found that the incorporation of rainfall uncertainty in decision making is crucial when modeling land use strategies in highly variable ecological-economic systems such as ranches in arid rain-fed areas. Where knowledge of rainfall distribution is inaccurate (due to lack of experience or climate change) both, farmers and rangelands, would be better off by precautiously expecting low rainfalls. Finally, our results show that minimizing herd size adjustment costs would support the establishment of sustainable land use strategies.

Suggested Citation

  • Domptail, Stéphanie & Nuppenau, Ernst-August, 2010. "The role of uncertainty and expectations in modeling (range)land use strategies: An application of dynamic optimization modeling with recursion," Ecological Economics, Elsevier, vol. 69(12), pages 2475-2485, October.
  • Handle: RePEc:eee:ecolec:v:69:y:2010:i:12:p:2475-2485
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    References listed on IDEAS

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    1. Michael T. Wallace & Joan E. Moss, 2002. "Farmer Decision-Making with Conflicting Goals: A Recursive Strategic Programming Analysis," Journal of Agricultural Economics, Wiley Blackwell, vol. 53(1), pages 82-100.
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    5. Stefan Baumgärtner & Martin F. Quaas, 2007. "Agro-biodiversity as natural insurance and the development of financial insurance markets," Working Paper Series in Economics 61, University of Lüneburg, Institute of Economics.
    6. Baumgärtner, Stefan & Quaas, Martin F., 2009. "Ecological-economic viability as a criterion of strong sustainability under uncertainty," Ecological Economics, Elsevier, vol. 68(7), pages 2008-2020, May.
    7. Higgins, Steven I. & Kantelhardt, Jochen & Scheiter, Simon & Boerner, Jan, 2007. "Sustainable management of extensively managed savanna rangelands," Ecological Economics, Elsevier, vol. 62(1), pages 102-114, April.
    8. Nerlove, Marc, 1983. "Expectations, Plans, and Realizations in Theory and Practice," Econometrica, Econometric Society, vol. 51(5), pages 1251-1279, September.
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    10. Heidelbach, Olaf, 2007. "Efficiency of selected risk management instruments: An empirical analysis of risk reduction in Kazakhstani crop production," Studies on the Agricultural and Food Sector in Transition Economies, Leibniz Institute of Agricultural Development in Transition Economies (IAMO), volume 40, number 92323.
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    12. Janssen, Marco A. & Anderies, John M. & Walker, Brian H., 2004. "Robust strategies for managing rangelands with multiple stable attractors," Journal of Environmental Economics and Management, Elsevier, vol. 47(1), pages 140-162, January.
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    1. repec:eee:ecolec:v:140:y:2017:i:c:p:46-57 is not listed on IDEAS
    2. repec:eee:ecomod:v:295:y:2015:i:c:p:42-46 is not listed on IDEAS
    3. repec:eee:agisys:v:157:y:2017:i:c:p:279-291 is not listed on IDEAS
    4. Briner, Simon & Finger, Robert, 2012. "Bio-economic modelling of decisions under yield and price risk for suckler cow farms," 123rd Seminar, February 23-24, 2012, Dublin, Ireland 122547, European Association of Agricultural Economists.
    5. repec:eee:ecomod:v:272:y:2014:i:c:p:175-187 is not listed on IDEAS
    6. Kihiu, Evelyne Nyathira, 2016. "Basic capability effect: Collective management of pastoral resources in southwestern Kenya," Ecological Economics, Elsevier, vol. 123(C), pages 23-34.

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