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Moving Forward: A Simulation-Based Approach for Solving Dynamic Resource Management Problems

Moving Forward: A Simulation-Based Approach for Solving Dynamic Resource Management Problems Standard dynamic resource optimization approaches, such as value function iteration, are challenged by problems involving complex uncertainty and a large state space. We extend a solution technique to address these limitations called approximate dynamic programming (ADP). ADP recently emerged in the macroeconomics literature and is novel to bioeconomics. We demonstrate ADP in solving a simple fishery management model under uncertainty to show: the mechanics of ADP in simplest form; the accuracy of ADP; the value of a nonparametric extension; and readily adaptable, non-specialized code. We then demonstrate ADP’s capacity to handle rich bioeconomic problems by solving the fishery management problem subject to four autocorrelated shock processes (governing economic returns and biological dynamics) which entails four sources of stochasticity and five continuous state variables. We find that accounting for multiple autocorrelation has important impacts on harvest policy and generates gains that depend crucially on the structure of harvest cost. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Marine Resource Economics University of Chicago Press

Moving Forward: A Simulation-Based Approach for Solving Dynamic Resource Management Problems

Springborn, Michael R.; Faig, Amanda
Marine Resource Economics , Volume 34 (3): 26 – Jul 1, 2019
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Publisher
University of Chicago Press
Copyright
© 2019 MRE Foundation, Inc. All rights reserved.
ISSN
0738-1360
eISSN
2334-5985
DOI
10.1086/704637
Publisher site
See Article on Publisher Site

Abstract

Standard dynamic resource optimization approaches, such as value function iteration, are challenged by problems involving complex uncertainty and a large state space. We extend a solution technique to address these limitations called approximate dynamic programming (ADP). ADP recently emerged in the macroeconomics literature and is novel to bioeconomics. We demonstrate ADP in solving a simple fishery management model under uncertainty to show: the mechanics of ADP in simplest form; the accuracy of ADP; the value of a nonparametric extension; and readily adaptable, non-specialized code. We then demonstrate ADP’s capacity to handle rich bioeconomic problems by solving the fishery management problem subject to four autocorrelated shock processes (governing economic returns and biological dynamics) which entails four sources of stochasticity and five continuous state variables. We find that accounting for multiple autocorrelation has important impacts on harvest policy and generates gains that depend crucially on the structure of harvest cost.

Journal

Marine Resource Economics – University of Chicago Press

Published: Jul 1, 2019

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