The bias danger of incorporating business risk into biophysical-economic models: a critical review on the existing economicapproaches

摘要

It is a well known fact that in many situations farmers consider market risk when making their economic decisions. Unfortunately the existing economic frameworks that incorporate this type of risk and that may be incorporated into biophysical economic models have important potential biases that can affect their predictive power. The objective of this paper is to provide a critical review of these approaches and to propose a novel technique that can be used to minimise these potential biases. The paper finishes with the analysis of a pilot study that provides some empirical support to the underlying theory of our technique.