Practical Application and Discernability of Risky Choice Models
01 Jan 2009-
About: The article was published on 2009-01-01 and is currently open access. It has received 4 citations till now.
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23 citations
TL;DR: The importance of risk preferences in agricultural production has long been identified as an important and preeminent issue of policy relevance as discussed by the authors, and recent developments in the study of production risk have called into question much of the core of risk production research.
Abstract: The importance of risk preferences in agricultural production has long been identified as an important and preeminent issue of policy relevance. Recent developments in the study of production risk have called into question much of the core of risk production research. This article provides an overview of the prominent literature attempting to quantify the impact of risk preferences on production and a discussion of the recently discovered challenges. These challenges are typified by (a) an inability to discern risk preferences, (b) an inability to discern the factors that relate to risk preferences, (c) evidence that prior estimation has severe problems, and (d) a general failure of current models to address the important policy or behavioral issues. Although some of these challenges may appear at first blush to be insurmountable, we suggest a new agenda for risk research in production that directly addresses each of these issues.
22 citations
Dissertation•
09 Sep 2015
Abstract: Cette these analyse les enjeux du developpement economique lies aux dynamiques des cours des matieres premieres en general et ceux du coton en particulier. Traditionnellement, les travaux s’inscrivant dans une optique de long terme questionnent la pertinence des specialisations primaires des PMA. A moyen terme l’interet porte davantage sur l’instabilite dont les consequences sont d’autant plus importantes que la dependance des pays a l’exportation de tels produits est forte. Les enjeux s’articulent alors autour des modalites de regulation des marches, du choix d'outils (publics ou marchands) pour la gestion des incertitudes, le tout dependant de l’apprehension de l’instabilite comme un phenomene endogene ou exogene. Dans un contexte nouveau marque par l’affirmation d’oligopoles de firmes, la segmentation du processus productif mondial, et la financiarisation des marches de matieres premieres, nous proposons un cadre analytique permettant d’aborder differemment ces problematiques. Nos travaux montrent d’abord comment les approches du type chaines globales de valeur peuvent etre mobilisees pour mieux orienter les strategies commerciales / industrielles des PMA. S’appuyant sur la notion de rationalite limitee dans le cadre de modeles de comportements heterogenes, ils prouvent ensuite l’existence d’une forte composante endogene dans l’instabilite et par la meme, l'inefficacite des seuls outils marchands. Au final, pour les pays africains producteurs de coton, il apparait qu’il reste possible de mettre ce produit au service d’une strategie globale de developpement. Cela passe par le recours a des mecanismes hybrides de gestion de l’instabilite, combine au renforcement des dynamiques de cooperation transfrontalieres en vue d’une structuration de chaines regionales de valeur.
11 citations
DOI•
27 Nov 2009
TL;DR: In this article, the impact of agricultural policy on water use and farms' incomes in the northeast of the Syrian Arab Republic was investigated. But the authors focused on the three governorates of Deir-Ezzour (DEG), Al-Rakka (RAK), and Al-Hassakeh (HAG), and the results showed that the negative impact of the current policy on the water balance is evident in the area of Al-Khabour basin, located almost entirely in HAG.
Abstract: This thesis aims at measuring the impact of agricultural policy on water use and farms’ incomes in the northeast of the Syrian Arab Republic. The scope of the research is confined to the three governorates of Deir-Ezzour (DEG), Al-Rakka (RAK), and Al-Hassakeh (HAG). The choice of these governorates, that together form the Northeast of Syria, is due to their heavy reliance on policy regulated crops, which makes them relatively more sensitive to any policy reform. Moreover, the negative impact of the current policy on water balance is evident in the Northeast, especially in the area of Al-Khabour basin, located almost entirely in HAG.
In the thesis, irrigated agriculture of the Northeast of Syria has been modelled by a set of representative farms, using the General Algebraic Modelling System (GAMS). The representative farms’ programming models are calibrated on data on observed cropping patterns and water use of 2005. Then, the policy reforms that have occurred after 2005 are considered in the models by changing the values of the relevant policy parameters and new baseline results obtained, inclusive of the most recent implemented reforms.
The comparison between the baseline results of 2005 and the post-reform baseline results show that the recent reform is expected to have a limited impact on water use and farm income. Predicted changes in water use are less than +5% on average, over the entire region, although they vary across the three governorates of the region, with negative change in Al-Hassakeh, and positive in Al-Rakka and Deir-Ezzour. On the other hand, changes in income levels and stability are more noticeable in the three governorates and are always positive. The changes in average income levels range from +15% in Deir-Ezzour to +3% in Al-Hassakeh. The impact on the stability of income is of the same magnitude in percent terms. It is of interest to note that the impact of the recent policy reforms, due to the stabilization of maize price, is greater on income stability than on average income levels in the three governorates.
The next analysis has involved simulation of alternative policy scenarios, including introduction of modern irrigation technology, reform in the farm credit system, and stabilization of alternative crops’ prices. The simulations reveal interesting policy implications. They illustrate that adoption of modern irrigation techniques, even by all farms in the region, would not solve the water scarcity problem in Al-Khabour basin where there will still be a noticeable deficit. This is due to the still low efficiency of modern irrigation schemes in the current condition of the region, but also because our model predicts that water saved thanks to the adoption of modern irrigation schemes will allow expansion of irrigated land. In addition, the results show that decoupling access to official credit from strategic crops would have negligible effects on cropping patterns and, consequently, water use. Similar results come out if the subsidy currently linked to cotton irrigated from private wells would be decoupled. Of the various possible simulated policies, stabilizing cumin price would have the largest positive impact on water consumption, because of expanding cumin cultivation, which is a crop with irrigation requirements, at the expense of wheat and other winter crops.
The thesis adds to the evidence that price policy is potentially the instrument that affects farmers’ decision the most. If effective in stabilizing price for water saving crops, this may be an important tool to combine farm welfare improvement with increased sustainability in water use.
3 citations
Cites background from "Practical Application and Discernab..."
...In addition, Just & Just (2009) demonstrate that the EUT hypothesis cannot be rejected because perceptions and preferences, which both affect behaviour under risk, cannot be measured separately....
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References
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TL;DR: In this paper, a methodology is developed for measuring consumer welfare loss from market demand due to contamination when information is imperfect, i.e., when news of contamination is withheld or undiscovered for a time as well as when excessive reporting and exaggeration cause overreaction.
176 citations
"Practical Application and Discernab..." refers background in this paper
...Further, following the approach developed by Foster and Just (1989), the cost of ignorance, delay, and failure to disclose information can be readily evaluated using the full array of Hicksian welfare concepts....
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TL;DR: In this article, the effect of the behavior of the disturbance term in the production function on the estimation of the parameters of the Cobb-Douglas production function is investigated in terms of probability limits.
Abstract: In estimating parameters of the Cobb-Douglas production function, assuming competition and profit maximization, the estimator to be employed depends on the specification of the behavior of the disturbance term in the production function. If this disturbance term is not transmitted to inputs, that is, if inputs are independent of this disturbance, then the least squares estimator is consistent; if the disturbance is fully transmitted to inputs, then a consistent estimator is obtained if some restrictions are imposed on the second moments of the disturbances in the system. A more general case may be specified, however, encompassing the above specifications as subcases. In this general case, the disturbance term may be only partially transmitted. If this occurs, then neither of the estimators noted above are consistent. In fairly general situations, these estimators furnish upper and lower bounds for the production function elasticity (in a one-input case) or for the sum of the elasticities (in the Q input case; Q any number). The consequences of each of these specifications, in terms of probability limits, are examined in some detail. This is carried out, first, for the one input case, and then the Q input case is discussed.
129 citations
TL;DR: The authors elicited utilities at two occasions by the certainty equivalent method from 30 women from the general population and the respondents gave certainty equivalents to gambles with years of life, consistent with prospect theory and may explain why patients opt for risky treatments.
Abstract: According to prospect theory, risk attitude changes depending on whether a prospect is perceived as a gain or a loss relative to a reference or aspiration level. To investigate risk attitude with respect to years of life, the authors elicited utilities at two occasions by the certainty equivalent method from 30 women from the general population. The respondents gave certainty equivalents to gambles with years of life. The gambles were two-outcome gambles with equal probabilities to experience each outcome. A shift from a risk-seeking towards a risk-averse attitude was observed with increasing expected value of the gambles. For each individual, the averaged responses over the two replications were fitted with an s- shaped logistic curve that showed an excellent fit (r2 ≥ 0.97) for all respondents. The aspiration level of survival can be derived from this function and was negatively correlated with age (r = -0.43, p < 0.025). The data are consistent with prospect theory and may explain why patients opt for ...
83 citations
TL;DR: This paper used the technique of generalized expected utility analysis to explore the robustness of some of the basic results in classical insurance theory to departures from the expected utility hypothesis on agents' risk preferences.
Abstract: This chapter uses the technique of “generalized expected utility analysis” to explore the robustness of some of the basic results in classical insurance theory to departures from the expected utility hypothesis on agents’ risk preferences. The topics include individual demand for coinsurance and deductible insurance, the structure of Pareto-efficient bilateral insurance contracts, the structure of Pareto-efficient multilateral risk sharing agreements, self-insurance vs. self-protection, and insurance decisions under ambiguity. Most, though not all, of the basic results in these areas are found to be quite robust to dropping the expected utility hypothesis.
82 citations
TL;DR: In this article, the authors evaluate the fit of several generalized expected utility models under homoscedasticity and three different error structures for the data set first reported in Hey and Orme (1994).
Abstract: We evaluate the fit of several generalized expected utility models under homoscedasticity and three different heteroscedastic error structures for the data set first reported in Hey and Orme (1994). Standard chi-squared tests are used for nested tests, and both the Akaike (1973) information criterion and its consistent version (Hurvich and Tsai, 1989) are used for non-nested ranking of these models. A testing framework is developed that explicitly accounts for the path-dependent nature of the model selection problem. Not only does the selection of preference models depend on the error structure assumed, but the reverse is also true: the selection of the error structure depends on the preference structure assumed.
77 citations
"Practical Application and Discernab..." refers methods in this paper
...Alternatively, some have used laboratory choices to estimate the choice function parameters and determine the best performing model (e.g., Hey and Orme 1994; Buschena and Zilberman 2009), or examine the overall fit (e.g., Tversky and Kahneman 1992)....
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