Preprint Article Version 1 This version is not peer-reviewed

Analysing Agricultural Diversification as a Risk Management Strategy with the Minimum Regret Model

Version 1 : Received: 8 January 2019 / Approved: 10 January 2019 / Online: 10 January 2019 (04:42:17 CET)

How to cite: van Etten, J. Analysing Agricultural Diversification as a Risk Management Strategy with the Minimum Regret Model. Preprints 2019, 2019010092 (doi: 10.20944/preprints201901.0092.v1). van Etten, J. Analysing Agricultural Diversification as a Risk Management Strategy with the Minimum Regret Model. Preprints 2019, 2019010092 (doi: 10.20944/preprints201901.0092.v1).

Abstract

Diversification is an important strategy for managing risk in agricultural systems. Risk analysis can help to support farmers’ diversification strategies, but existing analytical methods are complicated and little used. The minimum regret model helps to fill this gap. It provides a simple, transparent calculation procedure that can be executed with existing spreadsheet software. Regret is an important heuristic in the behavioural sciences and regret-based models are used in finance. The article presents the model with a numerical example. It also presents a framework to compare minimum regret portfolios with two limit cases (maximum utility and minimax regret). A case study illustrates the use of the model and the comparative framework.

Subject Areas

agricultural diversification; risk management; regret; portfolio; scenario

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