Scandinavian Working Papers in Economics
Working Papers in Economics,
University of Gothenburg, Department of Economics
No 54: Stochastic Production and Heterogeneous Risk Preferences: Commercial Fishers’ Gear Choices
Håkan Eggert () and Ragnar Tveterås ()
Additional contact information
Håkan Eggert: Department of Economics, School of Economics and Commercial Law, Göteborg University, Postal: Box 640, SE 405 30 GÖTEBORG
Ragnar Tveterås: Stavanger University College, Department of Business Administration,, Postal: P.O. Box 2557, Ullandhaug, N-4091, Stavanger, Norway
Abstract: As long as total effort cannot be completely controlled, a more thorough understanding of fishers’ supply response decisions will be beneficial for fishery managers. In this paper, we present a model of fishers’ gear choice, which is empirically estimated on a panel of Swedish demersal trawlers. The approach allows for heterogeneity both in production technology and in risk preferences. Stochastic revenue functions with fixed effects are estimated and used to predict expected revenue and standard deviation for each trip. We employ a linear utility function in the mean-standard deviation framework and then analyze the gear choices, using the predicted values together with vessel capacity and lagged variables for the previous trip in a random parameters-logit model, which allows for heterogeneous risk preferences. The results indicate that fishers have a strong tendency to choose the same gear used on the previous trip, while in general they react to changes in economic and biological conditions by responding positively to increases in expected landing values and negatively to increases in the variability of the expected landing values, indicating risk aversion.
Keywords: Risk preferences; two-moment decision models; Just-Pope production function; random-parameters logit; Swedish fisheries
21 pages, September 5, 2001
Full text files
gunwpe0054.pdf
- Fortchoming as
- Håkan Eggert and Ragnar Tveterås, 'Stochastic Production and Heterogeneous Risk Preferences: Commercial Fishers’ Gear Choices', American Journal of Agricultural Economics
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