Economic Thresholds In Pest Management Under Risk

Abstract

productivity is frequently biased. This is due to the functional form chosen for the control and damage functions in empirical work on pest control. Most studies on the economics of pesticide control have neglected the existence of risk and uncertainty. In fact, risk and uncertainty are important factors in decision making in pest management. Ignoring risk and uncertainty may lead to wrong recommendations. In general, existence of risk and uncertainty does not necessarily lead to increase pesticide use by individual farmer. There are some sources of uncertainty that affect decision making for pest management. Results of incorporating a stochastic initial pest population variable into an exponential control function and a linear damage function show that the farmer will apply pesticide until its price is just equal to the reduction in profit variability plus the expected loss reduction. The threshold pest population increases with the cost of pesticide and decreases with increases in output price, marginal damage coefficient, variance of pest population, and risk aversion parameter.