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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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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01 Apr 1982
Abstract: … An abundance of research has shown that human beings are conservative processors of fallible information. Such experiments compare human behavior with the outputs of Bayes's theorem, the formally optimal rule about how opinions (that is, probabilities) should be revised on the basis of new information. It turns out that opinion change is very orderly, and usually proportional to numbers calculated from Bayes's theorem – but it is insufficient in amount. A convenient first approximation to the data would say that it takes anywhere from two to five observations to do one observation's worth of work in inducing a subject to change his opinions. A number of experiments have been aimed at an explanation for this phenomenon. They show that a major, probably the major, cause of conservatism is human misaggregation of the data. That is, men perceive each datum accurately and are well aware of its individual diagnostic meaning, but are unable to combine its diagnostic meaning well with the diagnostic meaning of other data when revising their opinions. … Probabilities quantify uncertainty. A probability, according to Bayesians like ourselves, is simply a number between zero and one that represents the extent to which a somewhat idealized person believes a statement to be true. The reason the person is somewhat idealized is that the sum of his probabilities for two mutually exclusive events must equal his probability that either of the events will occur.
929 citations
01 Jan 1952
919 citations
"Practical Application and Discernab..." refers background in this paper
...Some have even been resurrected from earlier eras (e.g., the safety rules of Roy 1952, Katoka 1963, and Telser 1955-6)....
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870 citations
01 Apr 1982
TL;DR: In this paper, the authors discuss empirical findings addressed to such questions, such as: How well can untrained individuals perform such assessments? Do they manifest certain recurrent biases? How can assessors be calibrated and how can they be taught to become better assessors?
Abstract: In prescriptive analyses of decisions under uncertainty, decision makers and their expert advisors are often called upon to assess judgmental probability distributions of quantities whose values are unknown to them. This chapter discusses some empirical findings addressed to such questions as: How well can untrained individuals perform such assessments? Do they manifest certain recurrent biases? How can assessors be calibrated? How can they be taught to become better assessors? This chapter deals only with assessments of uncertain quantities that can be thought of as taking on a continuum of possible values. Hence we shall work exclusively with univariate density functions and their cumulative distribution functions. Several different procedures are available for assessing probability distributions of continuous, univariate random variables, but we shall consider only one particular procedure that we and our colleagues have often used in practice. It is called the method of direct fractile assessments .
774 citations
TL;DR: In this article, a sampling theory and Bayesian estimation technique for the Cobb-Douglas production function model is presented, where profits are stochastic and maximization of the mathematical expectation of profits is posited.
Abstract: In this paper we consider the specification and estimation of the Cobb-Douglas production function model. After reviewing the "traditional" specifying assumptions for the model which are based on deterministic profit maximization, we develop a model in which profits are stochastic and in which maximization of the mathematical expectation of profits is posited. "Sampling theory" and Bayesian estimation techniques for this model are presented. IN THIS PAPER we take up the problem of specifying and estimating a model of a profit maximizing firm operating with a Cobb-Douglas production function. Our model differs from the traditional production model considered in the literature, in that we assume that: (a) the production process is neither instantaneous nor deterministic; and (b) entrepreneurs are aware of the stochastic nature of production in their profit maximizing endeavors. This fundamental conceptual difference in our approach leads us to a new model with properties different from that of the traditional model.2 Also we develop both sampling theory and Bayesian estimation procedures for the new model. The order of presentation is as follows. In Section 2 we review the traditional model, and then go on in Section 3 to formulate the new model. In Section 4, sampling theory estimation procedures are developed for the new model. In contrast with the traditional model, it is found that classical least squares provides consistent estimators of the parameters of the Cobb-Douglas production function. With a normality assumption, these are also unbiased and maximum likelihood estimators. Finally, in Section 5, a Bayesian analysis of the new model is presented.
644 citations