Integrating risk and uncertainty in PMP models

Athanasios Petsakos () and Stelios Rozakis

No 114762, 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland from European Association of Agricultural Economists

Abstract: Positive Mathematical Programming (PMP) is one of the most commonly used methods of calibrating activity linear programming (LP) models in agriculture. PMP applications published thus far focus on the estimation of a farm’s nonlinear cost or profit function and rely on the recovery of unobserved or implicit information that can explain the initial model’s inability to calibrate. In this paper we use the PMP procedure to calibrate an expected utility model under the assumption that this implicit information can reveal a farmer’s profit expectations and risk attitude. The perfect calibration shows that PMP can be applied not only to LP models, but also to models that incorporate risk and this provides an interesting alternative to the traditional PMP methodology.

Keywords: Risk; and; Uncertainty (search for similar items in EconPapers)
Pages: 13
Date: 2011
New Economics Papers: this item is included in nep-upt
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:eaae11:114762

DOI: 10.22004/ag.econ.114762

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