Economic Value of Weather and Climate Forecasts

Case Study Attributes




Structure of Decision Problem

Decision: The nature of the decision or the possible actions the user of the forecast can take.
Dynamics: Indicates whether the problem is "static" or "dynamic" in nature.

Forecast Characteristics

Time Scale: The time period to which the forecast pertains.
Predictand: The meteorological element or event being forecast.
Format: Indicates whether the forecasts are "probabilistic" or "categorical".
Type: "Idealized" forecasts are those that are not currently possible in meteorology. "Realistic" forecasts however are based on actual, operationally available forecast products. "Derived" forecasts refer to those constructed through a transformation of realistic forecasts.
Quality Changes: Indicates whether the value of hypothetically improved forecasts is investigated as well.

Information Valuation

Baselines: The information source available to the decision maker in the absence of the forecast information. "Climatological" information is the most common. However, calibrated "persistence," or the tendency for consecutive time periods to exhibit similar weather, is also used. "Perfect" forecasts are sometimes used as an upper limit to forecast value.
Value of Information (VOI), imperfect: The actual monetary estimate assigned to imperfect forecasts.
Value of Information (VOI), perfect: The actual monetary estimate assigned to hypothetically perfect forecasts.
Risk Treatment: "Expected Value" refers to the situation in which the decision maker is "risk neutral," and forecast value is the difference between the expected return with only the baseline information. "Expected Utility" refers to the situation in which forecast value is based on maximizing expected utility (i.e., the decision maker is not risk neutral).



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