Publication: Cost-Loss Decision Models with Risk Aversion
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2008
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Instituto Complutense de Estudios Internacionales
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Abstract
Es generalmente aceptado que determinados fenómenos metereológicos extremos acontecidos durante las pasadas décadas están conectados con el cambio climático. Algunos de estos hechos, como sequías o heladas, afectan a la agricultura haciendo obligada la gestión del riesgo. El objetivo de este trabajo es analizar las decisiones de los agricultores respecto a la gestión del riesgo, tomando en cuenta la información climática y metereológica. El trabajo considera una situación en la que el agricultor, en su gestión de la producción agraria, tiene tecnología disponible para proteger la cosecha de los efectos del tiempo meteorológico. Este enfoque ha sido usado por Murphy et al. (1985), Katz and Murphy (1990) y otros en el caso de que los agricultores maximicen los beneficios esperados. No obstante, en esta ocasión, el modelo introduce un análisis de la actitud hacia al riesgo, de modo que se pueda evaluar cómo la decisión óptima es afectada por el coeficiente de aversión absoluta al riesgo de Arrow-Pratt; y se pueda al tiempo computar el valor económico de la información en semejante contexto.
Extreme meteorological events have increased over the last decades and it is widely accepted that it is due to climate change. Some of the extremes, like drought or frost episodes largely affect agricultural outputs and risk management becomes crucial. The goal of this work it is to analyze farmers’ decisions about risk management, taking into account climatological and meteorological information. We consider a situation in which the farmer, as part of crop management, has available a technology to protect the harvest from weather effects. This approach has been used by Murphy et al. (1985), Katz and Murphy (1990) and others in the case that the farmer maximizes the expected returns. Nevertheless, in our model we introduce the attitude towards risk, so we can evaluate how the optimal decision is affected by the absolute risk aversion coefficient of Arrow-Pratt, and compute the economic value of the information in this context.
Extreme meteorological events have increased over the last decades and it is widely accepted that it is due to climate change. Some of the extremes, like drought or frost episodes largely affect agricultural outputs and risk management becomes crucial. The goal of this work it is to analyze farmers’ decisions about risk management, taking into account climatological and meteorological information. We consider a situation in which the farmer, as part of crop management, has available a technology to protect the harvest from weather effects. This approach has been used by Murphy et al. (1985), Katz and Murphy (1990) and others in the case that the farmer maximizes the expected returns. Nevertheless, in our model we introduce the attitude towards risk, so we can evaluate how the optimal decision is affected by the absolute risk aversion coefficient of Arrow-Pratt, and compute the economic value of the information in this context.
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