Model Uncertainty, Ambiguity and the Precautionary Principle: Implications for Biodiversity Management

34 Pages Posted: 12 Aug 2008

See all articles by Giannis Vardas

Giannis Vardas

University of Crete - Department of Economics

Anastasios Xepapadeas

Athens University of Economics and Business; University of Bologna - School of Economics, Management, and Statistics

Date Written: August 12, 2008

Abstract

We analyze ecosystem management under 'unmeasurable' Knightian uncertainty or ambiguity which, given the uncertainties characterizing ecosystems, might be a more appropriate framework relative to the classic risk case (measurable uncertainty). This approach is used as a formal way of modelling the precautionary principle in the context of least favorable priors and maxmin criteria. We provide biodiversity management rules which incorporate the precautionary principle. These rules take the form of either minimum safety standards or optimal harvesting under precautionary approaches.

Keywords: Knightian uncertainty, uncertainty aversion, ambiguity aversion, risk aversion, precautionary principle, biodiversity, optimal harvesting, robust control

JEL Classification: D81, Q20

Suggested Citation

Vardas, Giannis and Xepapadeas, Anastasios, Model Uncertainty, Ambiguity and the Precautionary Principle: Implications for Biodiversity Management (August 12, 2008). Available at SSRN: https://ssrn.com/abstract=1221102 or http://dx.doi.org/10.2139/ssrn.1221102

Giannis Vardas

University of Crete - Department of Economics ( email )

GR-74100 Rethymnon, GR-74100
Greece

Anastasios Xepapadeas (Contact Author)

Athens University of Economics and Business ( email )

76 Patission Street
Athens, 104 34
Greece

University of Bologna - School of Economics, Management, and Statistics ( email )

Piazza Scaravilli 1
40126 Bologna, fc 47100
Italy

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