A process for the development and application of simulation models in applied economics

Abstract

Simulation models are widely used in applied economics to improve understanding of how a system could behave under different conditions. However, the potential degree to which such models can influence decision making depends on their ability to provide an adequate description of the important elements of a given problem. A systematic and robust procedure for the development and application of such models in agricultural, ecological, environmental and natural resource economics is presented. This process is based on the authors' experience across a broad range of model types and applications and extensive literature review. The practical impact of simulation models is argued to be greater where stakeholders and technical experts are consulted extensively throughout the modelling process.