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Pareto Optimal Trade in an Uncertain World: GMOs and the Precautionary Principle

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  • Robert G. Chambers
  • Tigran A. Melkonyan

Abstract

Optimal trade policy in an uncertain world is examined. Decision-maker attitudes toward uncertainty are represented in terms of the Gilboa-Schmeidler (1989) maximin expected-utility (MMEU) model. The central result is that in a two-country, general-equilibrium setting with both trading partners possessing an MMEU preference structure, Pareto optimality can require one trading partner to absorb all uncertainty in the economy if its set of priors is a subset of its trading partners. An immediate corollary is that autarky is Pareto optimal if the trading partner with the more inclusive set of priors either chooses or is endowed with a nonstochastic technology. Copyright 2007, Oxford University Press.

Suggested Citation

  • Robert G. Chambers & Tigran A. Melkonyan, 2007. "Pareto Optimal Trade in an Uncertain World: GMOs and the Precautionary Principle," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(2), pages 520-532.
  • Handle: RePEc:oup:ajagec:v:89:y:2007:i:2:p:520-532
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    File URL: http://hdl.handle.net/10.1111/j.1365-2966.2007.01015.x
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    Cited by:

    1. Treich, Nicolas, 2010. "The value of a statistical life under ambiguity aversion," Journal of Environmental Economics and Management, Elsevier, vol. 59(1), pages 15-26, January.
    2. Varios Autores, 2016. "Lecturas Sobre Derecho Del Medio Ambiente. Tomo Xvi," Books, Universidad Externado de Colombia, Facultad de Derecho, number 851, spring.
    3. María del Pilar García Pachón, 2016. "Instrumentos Económicos Y Financieros Para La Gestión Ambiental," Books, Universidad Externado de Colombia, Facultad de Derecho, number 852, spring.
    4. Marielle Brunette & Laure Cabantous & Stéphane Couture & Anne Stenger, 2009. "Assurance, intervention publique et ambiguïté : une étude expérimentale auprès de propriétaires forestiers privés," Économie et Prévision, Programme National Persée, vol. 190(4), pages 123-134.

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