Discount Factors and Risk Aversion in Managing Random Fish Populations

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Abstract
The effects of changes in the discount factor as compared with the effects of changes in risk aversion are examined for a simple stochastic model of fish population dynamics. Numerical results suggest that both optimal harvesting strategies and the resulting population dynamics are insensitive to changes in the discount factor, whereas changes in the degree of risk aversion in the utility function do cause significant changes in both. When risk averse utility functions are viewed as total revenue curves with marginal prices that decrease with supply, the results suggest that the more sensitive price is to supply, then the resulting optimal harvesting policy is smoother. Theoretical results are presented which suggest these results are robust beyond the specific model.Key words: discount factors, risk aversion, population dynamics, randomness

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