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Positive Mathematical Programming and Risk Analysis

Authors: Paris, Quirino; Paris, Quirino;

Positive Mathematical Programming and Risk Analysis

Abstract

In 1956, Freund introduced the analysis of agricultural price risk in a mathematical programming framework. His discussion admitted only constant absolute risk aversion. This paper generalizes the treatment of risk preference in a mathematical programming approach along the lines suggested by Meyer (1987) who demonstrated the equivalence of expected utility of wealth and a function of mean and standard deviation of wealth for a wide class of probability distributions that differ only by location and scale. This paper extends the definition of calibration under Positive Mathematical Programming (PMP) by considering limiting input prices along with the traditional decision variables. Furthermore, it shows how to formulate an analytical specification for the estimation of the risk preference parameters and calibrates the model to the base data within small deviations. The PMP approach under generalized risk allows also the estimation of output supply elasticities and the response analysis of decoupled farm subsidies that recently has interested policy makers. The approach is applied to a sample of farms that do not produce all the sample commodities.

Related Organizations
Keywords

model calibration, chance constraint, policy analysis, Risk analysis, Risk and Uncertainty, positive mathematical programming

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selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
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Average
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