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    Author(s): Jeffrey P. PrestemonGeoffrey H. Donovan
    Date: 2008
    Source: American Journal of Agricultural Economics. 90(4): 1118-1129
    Publication Series: Scientific Journal (JRNL)
    PDF: View PDF  (11.2 MB)

    Description

    Making input decisions under climate uncertainty often involves two-stage methods that use expensive and opaque transfer functions. This article describes an alternative, single-stage approach to such decisions using forecasting methods. The example shown is for preseason fire suppression resource contracting decisions faced by the United States Forest Service. Two-stage decision tools have been developed for these decisions, and we compare the expected gains to the agency, in terms of reduced personnel costs, of the single-stage model over the two-stage model, existing hiring decisions, and decisions that would have been made given perfect foresight about wildfire activity. Our analysis demonstrates the potential gains to versions of our single-stage model over existing hiring decisions, equivalent to a benefit-cost ratio of 22. The research also identified additional gains accruing from imposing biases on the single-stage model, associated with asymmetric penalties from contracting decisions.

    Publication Notes

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    • This article was written and prepared by U.S. Government employees on official time, and is therefore in the public domain.

    Citation

    Prestemon, Jeffrey P.; Donovan, Geoffrey H. 2008. Forecasting resource-allocation decisions under climate uncertainty: fire suppression with assessment of net benefits of research. American Journal of Agricultural Economics. 90(4): 1118-1129

    Keywords

    Climate, forecast, Forest Service, Poisson, returns to research, wildfire suppression

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