Technology selection-the impact of economic risk on decision making

• Published in: Aquaculture economics & management Vol. 22; no. 4; pp. 383 - 409
• Main Authors: King, Andrew S., Elliott, Nicholas G., James, Mark A., MacLeod, Catriona K., Bjorndal, Trond
• Format: Journal Article
• Language: English
• Published: Abingdon Taylor & Francis 02-10-2018; Taylor & Francis Ltd
• Subjects: Aquaculture; Capital; Case studies; Decision analysis; Decision making; Economics; Expansion; Fish; Freshwater fishes; Impact analysis; Investment; Marine molluscs; Modelling; Monte Carlo simulation; Offshore; production technology; Risk; Salmon; Smolts; stochastic modeling; Stochasticity; Technology; Variance analysis
• ISSN: 1365-7305; 1551-8663
• DOI: 10.1080/13657305.2016.1261962

Developing an understanding of economic variance (risk) is critical when evaluating alternative aquaculture production technologies. This article assesses the efficacy of employing a quantitative stochastic analysis technique to support technology selection decision making by undertaking a case study investment assessment of three alternative production expansion strategies (offshore sea-pens, land-based RAS growout and larger post-smolt) for the Tasmanian salmon industry. Results demonstrate that salmon aquaculture is undertaken with considerable underlying levels of economic risk, expansion offshore probably represents the lowest initial capital investment and greatest economic return, and that levels of financial uncertainty increase with land-based RAS production. The study highlights stochastic modeling provides significant "added-value" over single-point deterministic analysis and that developing an appreciation of the input variability is a key component in critically evaluating alternative production technologies.