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

Giannis Vardas and Anastasios Xepapadeas. Environ Resource Econ, published online 13 August 2009.

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 safety margins and minimum safety standards or optimal harvesting under precautionary approaches.

Keywords: Knightian uncertainty, Ambiguity, Risk, Precautionary principle, Biodiversity management, Optimal harvesting, Robust control

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