The Economics of Extended-Term Weather Forecasting

Abstract

The first part of this paper deals with the theoretical aspects of the economies of extended-term weather forecasting. The discussion centers around the optimal way of reacting to extended-term weather information, formulations of value of such information, and methods of comparing different forecasting systems. The second part deals with case studies where the value of extended-period forecasting to two firms is determined. The first study is of pea farming, which is sensitive to temperature, and the second is of logging, which is sensitive to rain. In these cases, it is shown that, the firms can benefit, from extended-period forecasts.