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2004-02-01 | Peer Reviewed

Stochastic Production and Heterogeneous Risk Preferences: Commercial Fishers’ Gear Choices

Eggert, Håkan and Ragnar Tveterås. 2004. “Stochastic Production and Heterogeneous Risk Preferences: Commercial Fishers’ Gear Choices.” American Journal of Agricultural Economics 86:1: 199-212.
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We present a model of fishers’ gear choice, which allows for heterogeneity both in production technology and risk preferences and apply it on a panel of Swedish trawlers.

Stochastic revenue functions are estimated and used to predict the mean and standard deviation of revenue for each trip. In a random-parameters logit model, we test if these predicted values explain gear choice. A majority of fishers respond positively to increased mean and negatively to increased variability of expected landing values, indicating risk aversion, but also show a strong tendency to choose the same gear used on the previous trip.

Co-author:

Ragnar Tveterås