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Stochastic Production and Heterogeneous Risk Preferences: Commercial Fishers' Gear Choices

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  • Håkan Eggert
  • Ragnar Tveteras

Abstract

We present a model of fishers' gear choice, which allows for heterogeneity both in production technology and risk preferences and apply it on a panel of Swedish trawlers. Stochastic revenue functions are estimated and used to predict the mean and standard deviation of revenue for each trip. In a random‐parameters logit model, we test if these predicted values explain gear choice. A majority of fishers respond positively to increased mean and negatively to increased variability of expected landing values, indicating risk aversion, but also show a strong tendency to choose the same gear used on the previous trip.

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  • Håkan Eggert & Ragnar Tveteras, 2004. "Stochastic Production and Heterogeneous Risk Preferences: Commercial Fishers' Gear Choices," American Journal of Agricultural Economics, John Wiley & Sons, vol. 86(1), pages 199-212, February.
    • Handle: RePEc:wly:ajagec:v:86:y:2004:i:1:p:199-212
    DOI: 10.1111/j.1467-8276.2004.tb18466.x
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