Alternative approaches to risk in aggregative programming: An evaluation

John A. Wicks

European Review of Agricultural Economics, 1978, vol. 5, issue 2, 159-173

Abstract: The choice of an appropriate technique for incorporating risk into aggregative programming models currently appears to be based largely on ad hoc criteria. In this paper an attempt is made to examine some of the conceptual issues which are typically ignored. Within the framework developed, the sector of APMAA which models the South Western Slopes of New South Wales is used to examine the differences in predicted results which arise as a consequence of these alternative treatments of risk. Results are obtained for sixteen formulations of risk based on the focus-loss, mean-variance or flexibility constraint approaches. These are compared with actual changes for one-year and four-year adjustment periods using the correctness of direction of change and Theil's inequality coefficient (U) as criteria.

Date: 1978
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