Approximating Optimal Numerical Solutions to Bio-economic Systems: How Useful is Simulation-optimization?

Jan Börner, Steven I. Higgins, Simon Scheiter and Jochen Kantelhardt

Quarterly Journal of International Agriculture, 2013, vol. 52, issue 3, 20

Abstract: For applications in agricultural and environmental economics, complex ecological systems are often oversimplified to the extent that ecologists rarely consider model results valid. Recursive optimization of complex systems represents an alternative, but requires strong assumptions regarding time preference and uncertainty. In this paper we explore the implications of merely approximating “true” optima of complex dynamic optimization problems using a technique called simulation-optimization. We develop a standard discrete renewable resource use problem and solve it numerically using both simulation-optimization and non-linear mathematical programming. We subsequently introduce non-linearity and uncertainty and graphically compare the performance of simulation-optimization vis-à-vis non-linear programming in predicting optimal control and state variable paths. On the basis of this comparison we discuss potential non-formal test procedures that could be used to assess simulation-optimization solutions of more complex problems that do not allow for such comparisons. We find that simulation-optimization can be a useful exploratory optimization technique when standard numerical optimization approaches fail to find near optimal solutions. That said, modelers should be careful in designing management functions of simulationoptimization problems and test their functional forms for severe misspecifications.

Keywords: Environmental Economics and Policy; Land Economics/Use (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://ageconsearch.umn.edu/record/173645/files/1_B_rner.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:qjiage:173645

DOI: 10.22004/ag.econ.173645

Access Statistics for this article

More articles in Quarterly Journal of International Agriculture from Humboldt-Universitaat zu Berlin Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().