Risk-averse Strategy Research Articles

Repurposing climate reconstructions for drought prediction in Southeast Asia

Climate information may help smallholder farmers in Southeast Asia takeinformed risks and reduce their climate vulnerability. Model-based seasonalforecasts are limited in the skill they offer with longer lead times, and intheir accessibility to farmers in remote regions. Climate reconstructions derivedfrom tree rings can complement model-based forecasts, providing probabilisticestimates of future climate at an annual resolution. This study demonstratesthe skill of PDSI reconstructions derived from the Monsoon Asia DroughtAtlas (MADA) to forecast a climate signal several years into the future, andillustrates the advantage of such information vis-a-vis the simple strategy ofassuming climate to persist from year to year. This work shows the potentialfor such climate reconstructions to improve inter-annual decisions on SoutheastAsian farms, and highlights the social research necessary to transmute thispotential into a valuable climate decision aid.In much of Southeast Asia the capacity of smallholder farmers to predict andprotect against drought is limited. Farmers commonly employ conservative, risk-averse strategies to farm planning and operation that reduce losses to climate-relateddamages, but that also reduce surpluses in years of favorable climate (Meinke andStone 2005). Farmers operating close to thresholds of sustenance and self-sufficiencywho fail to take advantage of these rents can fall into ‘poverty traps’ (Holling 2001;Sachs 2005), unable to lift themselves from degraded land conditions and a lackof capital. To help smallholders become informed risk takers and capitalize on the

Obtaining a fair arbitration outcome

The ‘minimax theorem’ is the most recognized theorem for determining strategies in a two-person zero-sum game. Other common strategies exist such as the ‘maximax principle’ and ‘minimize the maximum regret principle’. All these strategies follow the Von Neumann and Morgenstern linearity axiom which states that numbers in the game matrix must be cardinal utilities and can be transformed by any positive linear function f (x) = ax +b, a > 0, without changing the information they convey. This paper describes risk-averse strategies for a two-person zero-sum game where the linearity axiom may not hold. With connections to gambling theory, there is evidence to show why it can be optimal for the favourable player to adopt risk-averse strategies. Based on this approach, an arbitration value is obtained in a litigation game, where the amount awarded to the victim is less than expectation and shown to be ‘fairer’ when compared with the amount obtained using the Von Neumann and Morgenstern game theory framework.

Terrestrial Flight Response: A New Context for Terrestrial Activity in Sonoran Mud Turtles

The risk allocation hypothesis predicts that animals should be most averse to risk during brief and infrequent high risk situations. For animals in shallow aquatic habitats, encounters with terrestrial predators may represent such a situation. Terrestrial flight responses, acute movements from water onto land following a disturbance, may be a viable escape strategy during encounters with terrestrial predators foraging in shallow aquatic habitats. Sonoran mud turtles (Kinosternon sonoriense) occur in intermittent aquatic habitats in the Peloncillo Mountains, New Mexico. When Sonoran mud turtles were captured by hand in shallow pools or shallow stock tanks they frequently underwent terrestrial flight responses. In five of six trials in shallow stock tanks, and three of seven trials in shallow pools, turtles left the water within 20 min of being released, often climbing out of sight up relatively steep slopes. This behavior was not observed in four trials in which turtles were captured with hoop nets in deep stock tanks. Turtles that underwent terrestrial flight responses were significantly larger than non-responders. Terrestrial flight responses appear to be a risk aversion strategy in Sonoran mud turtles occupying shallow aquatic habitats. This unusual behavior may be widespread among animals that inhabit shallow aquatic habitats.

Analysis of power-aware buffering schemes in wireless sensor networks

We study the power-aware buffering problem in battery-powered sensor networks, focusing on the fixed-size and fixed-interval buffering schemes. The main motivation is to address the yet poorly understood size variation-induced effect on power-aware buffering schemes. Our theoretical analysis elucidates the fundamental differences between the fixed-size and fixed-interval buffering schemes in the presence of data-size variation. It shows that data-size variation has detrimental effects on the power expenditure of the fixed-size buffering in general, and reveals that the size variation induced effects can be either mitigated by a positive skewness or promoted by a negative skewness in size distribution. By contrast, the fixed-interval buffering scheme has an obvious advantage of being eminently immune to the data-size variation. Hence the fixed-interval buffering scheme is a risk-averse strategy for its robustness in a variety of operational environments. In addition, based on the fixed-interval buffering scheme, we establish the power consumption relationship between child nodes and parent node in a static data-collection tree, and give an in-depth analysis of the impact of child bandwidth distribution on the parent's power consumption. This study is of practical significance: it sheds new light on the relationship among power consumption of buffering schemes, power parameters of radio module and memory bank, data arrival rate, and data-size variation, thereby providing well-informed guidance in determining an optimal buffer size (interval) to maximize the operational lifespan of sensor networks.

Attack or call for help? Rapid individual decisions in a group-hunting ant

Adaptive decision making is an important trait of many animals, especially in the context of foraging. Social animals are able to optimize their foraging behavior individually or on a collective level. In the predatory ant Leptogenys diminuta, scout ants search individually for prey and then decide within seconds whether to attack directly or to recruit a large raiding group for a collective attack. Both strategies have inherent costs and benefits, and the information collected by the scout during prey assessment is crucial for an appropriate reaction. We studied how differences in prey type and size are taken into account by experienced and inexperienced scout ants. Although decisions are made under time pressure and frequently without disturbing the prey, experienced scouts adjusted their raiding strategies in accordance with predicted hypotheses. In contrast, inexperienced scouts preferred a risk-averse strategy by recruiting large raiding groups. After a 4-week learning phase, inexperienced scouts developed raiding strategies equal to experienced scouts, independent of hunting success treatments, suggesting a predetermined behavioral repertoire. Using gas chromatography and mass spectrometry, we studied furthermore whether prey items could be discriminated by chemical cues. Natural prey was distinguishable on a high taxonomic level. In raids on chemically treated dummies, however, responses were not equal to those elicited by real prey. Thus, the ants probably integrate additional information, such as visual or tactile cues, into their decision-making process. Overall, L. diminuta exhibits a remarkably cautious, quick, and adaptive decision-making system in which prey cuticular chemicals are incorporated as informational cues.

Oxytocin and cooperation under conditions of uncertainty: The modulating role of incentives and social information

The neuropeptide Oxytocin (OT) has been implicated in many aspects of mammalian social behavior. This study investigates how OT interacts with two well-studied determinants of cooperative behavior: incentives and social information. Participants received OT or a placebo and played two economic games: a Coordination Game (with strong incentives to cooperate) and a Prisoner's Dilemma (with weak cooperative incentives). OT enhanced cooperation only when social information was present, and this effect was significantly more pronounced in the Coordination Game. When social information was lacking, OT surprisingly decreased cooperation. Consistent with the well-established role of OT in trust-building and in social cognition, social information appears to be crucial for OT to boost cooperative expectations in an interdependent social interaction that provides incentives to cooperate. When these cues are absent, OT appears to instead elicit a risk-averse strategy.

Climate change, uncertainty and prehistoric hunter–gatherer mobility

The onset of Little Ice Age conditions in California’s Sierra Nevada mountains resulted in increased temporal and spatial variability, and hence uncertainty regarding the distribution and production of resources targeted by its inhabitants, the Western Mono. The Mono responded with a risk-averse strategy composed of lowland winter population aggregation supported by logistical forays and seasonal residential dispersals to the high country, both ways of averaging variance in environmental productivity. These patterns were reconstructed using surface archaeology, GIS, and two straightforward spatial statistics, nearest-neighbor and variance-to-mean ratios, that combined provide a robust, objective picture of population aggregation and dispersal and the scale of these phenomena in different environments and seasons. These diverse strategies conform to expectations regarding the best ways for hunter–gatherers to cope with uncertainty, particularly in mountain environments. Despite this, the residentially mobile aspect of the pattern is rare in mountains and probably the result of historical connections between the Mono and Great Basin groups employing similar behaviors. Ultimately, this research suggests that climate change and environmental variability condition risk-averse, satisficing economic behaviors focused more on security than optimization, implying that pronounced environmental variability runs counter to economic intensification and its association with the evolution of more complex societies.

Hyperstar: A multi-path Astar algorithm for risk averse vehicle navigation

The Astar algorithm, which forms the backbone of vehicle navigation systems, is capable of producing only one path. Given uncertainty about link travel times, there is interest in algorithms that can deliver all the paths that may be optimal, termed collectively a hyperpath, to improve travel time reliability. The actual path taken within the hyperpath will typically be determined by on-trip events, like incidences of congestion leading to delay. In this paper, the Spiess and Florian algorithm for generating hyperpaths in transit networks is adapted to road networks by assuming that drivers follow a risk averse strategy whenever a choice of path arises. To improve the efficiency of the resulting algorithm for vehicle navigation applications, the Astar approach to link selection is incorporated, leading to the Hyperstar algorithm. Proof of the optimality of the algorithm is provided, followed by numerical examples.

The consequences of climate‐driven stop‐over sites changes on migration schedules and fitness of Arctic geese

1. How climatic changes affect migratory birds remains difficult to predict because birds use multiple sites in a highly interdependent manner. A better understanding of how conditions along the flyway affect migration and ultimately fitness is of paramount interest. 2. Therefore, we developed a stochastic dynamic model to generate spatially and temporally explicit predictions of stop-over site use. For each site, we varied energy expenditure, onset of spring, intake rate and day-to-day stochasticity independently. We parameterized the model for the migration of pink-footed goose Anser brachyrhynchus from its wintering grounds in Western Europe to its breeding grounds on Arctic Svalbard. 3. Model results suggested that the birds follow a risk-averse strategy by avoiding sites with comparatively high energy expenditure or stochasticity levels in favour of sites with highly predictable food supply and low expenditure. Furthermore, the onset of spring on the stop-over sites had the most pronounced effect on staging times while intake rates had surprisingly little effect. 4. Subsequently, using empirical data, we tested whether observed changes in the onset of spring along the flyway explain the observed changes in migration schedules of pink-footed geese from 1990 to 2004. Model predictions generally agreed well with empirically observed migration patterns, with geese leaving the wintering grounds earlier while considerably extending their staging times in Norway.

Genotype × environment interaction for yield and reaction to leaf spot infections in groundnut in semiarid West Africa

Capitalizing on the yield potential in available groundnut germplasm, and high stability of kernel yield are important requirements for groundnut producers in semiarid environments. Forty-seven groundnut genotypes were evaluated from 2003 to 2005 at 4 locations representative of the Guinea and Sudan savanna ecologies in Ghana. The objectives were to assess genotypic differences in reaction to early and late leaf spot infections under natural field conditions, assess the extent of genotype × environment (G × E) interaction for kernel yield, and determine the relationship between yield potential and yield stability. Genotypes differed significantly in their reaction to leaf spot infections indicated by the area under disease progress curve (AUDPC). Genotypic AUDPC was negatively correlated with maturity period (P < 0.01), with kernel yield (P < 0.05) at each of the 3 locations in the Guinea savanna ecology but not in the Sudan savanna ecology and with each of four stability parameters (P < 0.05). High or low yielding genotypes were grouped based on Dunnett’s test at P < 0.10. High yielding groups had significantly low AUDPC, high biomass, high partitioning of dry matter for kernel growth, and were later in maturity compared to low yielding genotypes. Significant G × E interaction effect for kernel yield was dominated mainly by the lack of correlation among environments variance (76–78%) relative to the heterogeneity of genotypic variance component (22–24%). Stability of yield assessed through the among-environment variance, Wricke’s ecovalence, and Finlay-Wilkinson regression coefficient revealed that genotypes in the higher yielding group were relatively unstable compared to the low yielding group. Indicated by the Kataoka’s index of yield reliability, however, relatively unstable genotypes in the high yielding group are expected to be more productive even under assumptions of high risk aversion (P = 0.75–0.95) compared to the more stable, low yielding genotypes. The findings indicate that deploying these recently developed germplasm in semiarid regions in West Africa provides a better match to farmers’ risk-averse strategies compared with the use of existing earlier maturing cultivars.

Variability and uncertainty in spatial, temporal and spatiotemporal crop-yield and related data.

Application of the theories of precision agriculture to the practicalities of broad-acre farming relies on successful handling of the ramifications of uncertainty in information, i.e. information pertaining to the spatial and temporal variation of those factors which determine yield components and/or environmental losses. This paper discusses the uncertainty of yield and related variables as measured by their spatial and temporal variance. The magnitude of these two components gives a suggestion as to the appropriate scale of management. Simultaneous reporting on spatial and temporal variation is rare and the theory of these types of process is still in its infancy. Some brief theory is presented, followed by several examples from the Rothamsted classic experiments, yield-monitoring experiments in Australia, a long-term barley trial in Denmark, and a soil moisture monitoring network. It is clear that annual temporal variation is much larger than the spatial variation within single fields. This leads to the conclusion that if precision agriculture is to have a sound scientific basis and ultimately a practical outcome then the null hypothesis that still remains to be seriously researched is: 'given the large temporal variation in yields relative to the scale of a single field, then the optimal risk aversion strategy is uniform management.'

Probabilistic participation in public goods games

Voluntary participation in public goods games (PGGs) has turned out to be a simple but effective mechanism for promoting cooperation under full anonymity. Voluntary participation allows individuals to adopt a risk-aversion strategy, termed loner. A loner refuses to participate in unpromising public enterprises and instead relies on a small but fixed pay-off. This system leads to a cyclic dominance of three pure strategies, cooperators, defectors and loners, but at the same time, there remain two considerable restrictions: the addition of loners cannot stabilize the dynamics and the time average pay-off for each strategy remains equal to the pay-off of loners. Here, we introduce probabilistic participation in PGGs from the standpoint of diversification of risk, namely simple mixed strategies with loners, and prove the existence of a dynamical regime in which the restrictions ono longer hold. Considering two kinds of mixed strategies associated with participants (cooperators or defectors) and non-participants (loners), we can recover all basic evolutionary dynamics of the two strategies: dominance; coexistence; bistability; and neutrality, as special cases depending on pairs of probabilities. Of special interest is that the expected pay-off of each mixed strategy exceeds the pay-off of loners at some interior equilibrium in the coexistence region.

Risk-prone hunting by chimpanzees (Pan troglodytes schweinfurthii) increases during periods of high diet quality

Most studies suggest that during times of nutritional stress, an animal faced with two foraging choices should follow a risk-prone strategy, choosing the option with highest payoff variance. This “scarcity/risk” hypothesis was developed to account for the foraging patterns of small animals with high metabolic rates susceptible to the threat of starvation. In this paper, we propose that animals should also be risk-prone when their diet quality is particularly high, far exceeding that which is needed to survive. Under these circumstances, the costs of experiencing a low or negative payoff can easily be recouped. We suggest that large-bodied omnivores are most likely to adopt this “abundance/risk” strategy. We investigate this question among wild chimpanzees (Pan troglodytes) that choose between a risk-averse strategy of feeding on plant material and a risk-prone strategy of hunting red colobus monkeys. Using 14 years of data on the Kanyawara chimpanzees of Kibale National Park, Uganda, we find strong evidence that chimpanzees follow the “abundance/risk” strategy. Both hunting rate (hunts/100 observation hours) and the probability of hunting upon encountering red colobus monkeys were positively correlated with seasonal consumption of ripe drupe fruits, a class of preferred food associated with elevated reproductive performance by females. Critically, these results remained statistically significant after controlling for the potentially confounding effects of male chimpanzee party size and the presence of sexually receptive females. These findings suggest that the relationship between risk-sensitive foraging and diet quality depends upon the daily probability of starvation, the number of alternative foraging strategies, and the degree to which diet quality satisfies an animal’s nutritional requirements.

General Methodology Combining Engineering Optimization of Primary HVAC&R Plants with Decision Analysis Methods—Part I: Deterministic Analysis

This paper is the first of a two-part sequence that proposes a general methodology for dynamic scheduling and optimal control of complex primary HVAC&R plants, which combines engineering analyses within a practical decision analysis framework by modeling risk attitudes of the operator. The methodology involves a computationally efficient, deterministic engineering optimization phase for scheduling and controlling primary systems over the planning horizon, followed by a systematic and comprehensive stochastic sensitivity and decision analysis phase, where various sources of uncertainties are evaluated along with alternative non-optimal but risk-averse operating strategies. This paper describes the deterministic component of the analysis methodology, which essentially involves the development of response surface models for different combinations of system configurations to be used for static optimization and then using them in conjunction with the modified Dijkstra's algorithm for dynamic scheduling and optimal control under different operating conditions and pricing signals. The proposed methodology is illustrated for a semi-real hybrid cooling plant operated under two different pricing schemes: real-time pricing and time-of-use with electricity demand. We feel that the general methodology framework proposed sacrifices very little in accuracy while being much more efficient computationally than the more complicated optimization methods proposed in thegeneral literature. Moreover, this approach is suitable for online implementation, and it is also general enough to be relevant to other energy systems.

General Methodology Combining Engineering Optimization of Primary HVAC&R Plants with Decision Analysis Methods—Part II: Uncertainty and Decision Analysis

A companion paper (Jiang and Reddy 2007) presents a general and computationally efficient methodology for dynamic scheduling and optimal control of complex primary HVAC&R plants using a deterministic engineering optimization approach. The objective of this paper is to complement the previous work by proposing a methodology by which the robustness of the optimal deterministic strategy to various sources of uncertainties can be evaluated against non-optimal but risk averse alternatives within a formal decision analysis framework. This specifically involves performing a sensitivity analysis on the effect of various stochastic factors that impact primary HVAC&R plant optimization, such as the uncertainty in load prediction and the uncertainties associated with various component models of the equipment. This is achieved through Monte Carlo simulations on the deterministic outcome, which allow additional attributes, such as its variability and the probability of insufficient cooling, to be determined along with the minimum operating cost. The entire analysis is then repeated for a specific non-optimal but risk-averse operating strategy. Finally, a formal decision analysis model using linear multi-attribute utility functions is suggested for comparing both these strategies in a framework that explicitly models the risk perception of the plant operator in terms of the three attributes. The methodology is demonstrated using the same illustrative case study as the companion paper.

Risk Reduction and Resource Pooling on a Cooperation Task

Two experiments investigated choice in adult humans on a simulated cooperation task to evaluate a risk-reduction account of sharing based on the energy-budget rule. The energy-budget rule is an optimal foraging model that predicts risk-averse choices when net energy gains exceed energy requirements (positive energy budget) and risk-prone choices when net energy gains fall below energy requirements (negative energy budget). Because sharing can minimize variability in energy gain (i.e., is a risk-averse strategy), the model predicts that sharing should occur under positive but not negative budget conditions. Energy budgets were modeled by substituting money gains for energy gains and earnings requirements for energy requirements. Participants chose between work- alone or work-with-others (sharing) response options. Experiment 1 investigated the effects on choice of manipulating the value of the earnings requirement and the presence of the partner’s money counter. Choice for the sharing option varied as a function of the earnings requirement in a pattern consistent with the predictions of the energy-budget rule. The presence of the partner’s money counter did not influence preference. Experiment 2 replicated Experiment 1 and also showed that under conditions with no earnings requirement (conditions in which the energy-budget rule makes no predictions), subjects often preferred the sharing option over the independent option when sharing increased the partner’s 13arnings, and that subjects often preferred an independent option over the sharing option when the independent option produced a constant earnings amount. Overall, the results replicate and extend the results of earlier earnings-budget studies and further show that laboratory procedures are useful for evaluating the plredictions of risksensitive and social-foraging models.

The International Realm, Framing Effects, and Security Strategies: Britain in Peace and War

In combining the domestic and international levels, I contend that the international environment can enable a domestic win-set and thereby guide the formation of a state's international security strategy. The trigger is the nature of and changes in the extant international setting. Based on findings from framing effects and prospect theory, I contend that periods of external crisis, conflict, and war will shift the public's domain to one of relative losses. In this realm, it will be easier for foreign policy advisors who favor offensive security strategies to frame the national debate. Periods of international peace, tranquility, and prosperity will shift the public's domain to relative gains, which will make it easier for advisors who favor risk averse and defensive strategies to frame the national discussion. The outcome can be a more offensive or defensive strategy than the state would have otherwise pursued. I apply the model to Britain to examine Britain's decision to adopt a Limited Liability strategy between 1912 and 1914, and to escalate to a Continental Commitment by 1916. A version of this paper was presented at the 2003 Annual International Studies Association Convention. I would like to thank Jane Cramer, Tom Rice, and Jeffrey Taliaferro for their helpful comments and suggestions.

Using fuzzy set theoretic techniques to analyze travel risk: An empirical study

Because of the subjective cognition on risk attributes and the fuzziness on perceived-risk judgment, consumers feel uncertain in purchasing travel-related products. In this paper, we use the membership grade of ‘possibility’ and ‘significance’ to establish the analysis matrix of travel risks, which can describe the consumers’ different cognition on perceived-risk attribute. After that, we combine the analysis matrix and the degree of risk preference strategy to build the travel perceived risk averse strategy matrix and then to analyze the consumers’ preference averse strategy. Finally, we use the consumers to Kinmen National Park located on Kinmen Island in the Taiwan Strait as an example to do empirical study. The result shows that consumers think the financial and physical risks attributes are higher and more significant. This implies that consumers have the characteristic of higher perceived risk and they prefer the averse strategy of buying the travel assurance.

Rehabilitation and Conversion of Coal-based Power Plants to Cogeneration Plants for Increased Efficiency

ABSTRACT The analyses of electric utility system operations and in resource planning are becoming more and more complicated since deregulation came to the power industries. The risk aversion strategy is leading generation planners toward minimum risk capacity planning decision and asset optimization. Some of the most attractive alternatives, which result in scaled down capacity increments, include: Rehabilitation/upgrading Cogeneration or combined heat and power (CHP) generation Power plant rehabilitation is a high ranged concept essentially aimed at continued operations of the generating unit at, or near rated capacities for an extended life of the plant. In many cases, conservatively designed older units with components that were speci.ed with margin can be upgraded to yield additional capacity. The capacity increases are usually rather small and would not by themselves compensate for growth in demand. In essence, the need to rehabilitate may arise due to reasons such as low availability factor, low eff...

More Phoenix Than Vulture: The Case For Distressed Investor Presence in the Bankruptcy Reorginization Process

Firms in Chapter 11 bankruptcy are presumed to have going-concern value, with operational efficiencies, even though they are usually technically insolvent. A primary objective of Chapter 11 bankruptcy proceedings, therefore, is to protect such going-concern value from the potentially inefficient and destructive behavior of competing and self-motivated creditors. Commentators have often described the challenges of Chapter 11 proceedings as the “residual actor problem.” When the firm is solvent, shareholders, as the residual owners, know that their wealth, often reflected by a publicly traded stock value, is closely tied to firm value, and hence to the success of managerial decision-making. Consequently, it is in shareholders’ interests to champion strategies for long-run profit maximization. By contrast, when the firm is insolvent and in Chapter 11, shareholders’ claims are, by definition, negligible, and creditors cannot be relied upon to maximize an insolvent firm’s value. Senior creditor classes, whose debt may be fully secured or “above water,” will presumably favor risk-averse strategies that maximize the probability of recovering the full value of their loans. Junior creditors, who face low probabilities of appreciable recovery, will prefer high-risk strategies because there is little to lose and potentially something to gain by “swinging for the fences.” The unfortunate result in many bankruptcies is discord between two groups of potential decision makers: overly risk-averse creditors holding claims that are close to or are “above water,” and overly risk-tolerant creditors with claims that are far “below water.” The dynamic is “a basic form of the prisoner’s dilemma: the aggregation of individualistic, albeit rational, decisions leading to an inferior collective result.” An appropriate goal for Chapter 11 proceedings, therefore, is the effective provision of a collective forum for the re-creation of an efficient residual claimant class by creating a new “above-water” equity actor whose self-interest is aligned with the long-run value maximization of the firm. This study examines how the increased presence of distressed-debt investors in bankruptcy proceedings has greatly affected the residual actor problem. The thesis of this paper is that distressed-debt investors generally have a salutary impact on the residual actor problem of bankruptcy by expediting business reorganizations and protecting going-concern enterprise values.