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Stochastic Dominance, Entropy and Biodiversity Management

  • 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)

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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File URL: http://faculty.ucmo.edu/econfinpapers/wpaper/wp0807.pdf
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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
Contact details of provider: Postal: Dockery 300, Warrensburg, MO 64093
Phone: (660) 543-4246
Fax: (660) 543-8465
Web page: http://www.ucmo.edu/econ

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  1. Weitzman, Martin L, 1993. "What to Preserve? An Application of Diversity Theory to Crane Conservation?," The Quarterly Journal of Economics, MIT Press, vol. 108(1), pages 157-83, February.
  2. Martin L. Weitzman, 1998. "The Noah's Ark Problem," Econometrica, Econometric Society, vol. 66(6), pages 1279-1298, November.
  3. Simpson, R. David, 2002. "Definitions of Biodiversity and Measures of Its Value," Discussion Papers dp-02-62, Resources For the Future.
  4. Lueck, Dean & Michael, Jeffrey A, 2003. "Preemptive Habitat Destruction under the Endangered Species Act," Journal of Law and Economics, University of Chicago Press, vol. 46(1), pages 27-60, April.
  5. Hans-Peter Weikard, 2002. "Diversity Functions and the Value of Biodiversity," Land Economics, University of Wisconsin Press, vol. 78(1), pages 20-27.
  6. Golan, Amos & Judge, George G. & Miller, Douglas, 1996. "Maximum Entropy Econometrics," Staff General Research Papers 1488, Iowa State University, Department of Economics.
  7. 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, vol. 32(4), pages 533-550, December.
  8. Gardner M. Brown & Jason F. Shogren, 1998. "Economics of the Endangered Species Act," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 3-20, Summer.
  9. Pablo Benítez & Timo Kuosmanen & Roland Olschewski & G. Cornelis van Kooten, 2004. "Conservation Payments under Risk: A Stochastic Dominance Approach," Working Papers 2004-05, University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group.
  10. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, 03.
  11. 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.
  12. 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, vol. 40(3), pages 411-419, March.
  13. Haim Levy, 1992. "Stochastic Dominance and Expected Utility: Survey and Analysis," Management Science, INFORMS, vol. 38(4), pages 555-593, April.
  14. Weitzman, Martin L, 1992. "On Diversity," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 363-405, May.
  15. 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.
  16. Robert Innes & Stephen Polasky & John Tschirhart, 1998. "Takings, Compensation and Endangered Species Protection on Private Lands," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 35-52, Summer.
  17. Loomis, John B. & White, Douglas S., 1996. "Economic benefits of rare and endangered species: summary and meta-analysis," Ecological Economics, Elsevier, vol. 18(3), pages 197-206, September.
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