Value of perfect ENSO phase predictions for agriculture: Evaluating the impact of land tenure and decision objectives

While the notion that climate forecasts are potentially valuable has been established, questions of when they may be more or less valuable have proven harder to resolve.

Using simulations, we estimate the expected value of seasonal climate information under alternative assumptions about (a) land tenure (ownership vs. short-term leases) and (b) the decision maker's objective function (expected utility vs. prospect theory value function maximization), employing a full range of plausible parameter values for each objective function. This allows us to show the extent to which the value of information depends on risk preferences, loss aversion, wealth levels and expectations, as well as situational constraints.