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Stochastic Production And Heterogeneous Risk Preferences: Commercial Fishers' Gear Choice

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  • Eggert, Hakan
  • Tveteras, Ragnar

Abstract

As long as total effort cannot be completely controlled, a more thorough understanding of fishers' supply response decisions will be beneficial for fisheries 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 allow for heterogeneous 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 and negatively to increases in the variability of the expected landing values, indicating risk aversion.

Suggested Citation

  • Eggert, Hakan & Tveteras, Ragnar, 2001. "Stochastic Production And Heterogeneous Risk Preferences: Commercial Fishers' Gear Choice," 2001 Annual meeting, August 5-8, Chicago, IL 20671, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea01:20671
    DOI: 10.22004/ag.econ.20671
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    8. Wu, Feng & Guan, Zhengfei, 2014. "Efficient Estimation of Risk Attitude with Seminonparametric Risk Modeling," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170625, Agricultural and Applied Economics Association.
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    11. Smith, Martin D. & Zhang, Junjie & Coleman, Felicia C., 2008. "Econometric modeling of fisheries with complex life histories: Avoiding biological management failures," Journal of Environmental Economics and Management, Elsevier, vol. 55(3), pages 265-280, May.
    12. Sultan, Riad, 2020. "Fishing location choice and risk preferences among small fishers – Implications for fisheries management policies," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 15(2), June.
    13. Haynie, Alan C. & Hicks, Robert L. & Schnier, Kurt E., 2009. "Common property, information, and cooperation: Commercial fishing in the Bering Sea," Ecological Economics, Elsevier, vol. 69(2), pages 406-413, December.
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    17. Eggert, Håkan & Tveterås, Ragnar, 2004. "Potential Rent and Overcapacity in the Swedish Baltic Sea Trawl Fishery," Working Papers in Economics 152, University of Gothenburg, Department of Economics.
    18. Johnson, Ayana Elizabeth & Saunders, Daniel Kaiser, 2014. "Time preferences and the management of coral reef fisheries," Ecological Economics, Elsevier, vol. 100(C), pages 130-139.
    19. McConnell, Kenneth E. & Price, Michael, 2006. "The lay system in commercial fisheries: Origin and implications," Journal of Environmental Economics and Management, Elsevier, vol. 51(3), pages 295-307, May.
    20. Nguyen, Quang, 2009. "Do fishermen have different preferences?: Insights from an experimental study and household data," MPRA Paper 16012, University Library of Munich, Germany.
    21. César Salazar Espinoza, 2015. "Share Contract Choices and Economic Performance: Empirical Evidence from the Artisanal Fisheries Sector in Chile," Marine Resource Economics, University of Chicago Press, vol. 30(1), pages 71-95.
    22. Gelcich, Stefan & Edwards-Jones, Gareth & Kaiser, Michel J., 2007. "Heterogeneity in fishers' harvesting decisions under a marine territorial user rights policy," Ecological Economics, Elsevier, vol. 61(2-3), pages 246-254, March.
    23. Sundar, B. & Virmani, Vineet, 2013. "Attitudes towards Risk of Forest Dependent Communities - Evidence from Andhra Pradesh," IIMA Working Papers WP2013-12-01, Indian Institute of Management Ahmedabad, Research and Publication Department.
    24. Ligeon, Carel & Jolly, Curtis M. & Bencheva, Nelly & Delikostadinov, Stanko & Puppala, Naveen, 2009. "Production risks in Bulgarian peanut production," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 9(01), pages 1-8.

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    More about this item

    Keywords

    Risk and Uncertainty;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • Q22 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Fishery

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