Stakeholder Payoff Matrix for Disparate Tradeoffs

Authors: HOAG, DANAL - COLORADO STATE UNIVERSITY; Ascough Ii, James; Fathelrahman, Eihab; KESKE, C - COLORADO STATE UNIVERSITY

Submitted to: Symposium Proceedings
Publication Type: Proceedings
Publication Acceptance Date: 10/17/2007
Publication Date: 10/27/2007
Citation: Hoag, D., Ascough II, J.C., Fathelrahman, E.M., Keske, C.M. 2007. Stakeholder Payoff Matrix for Disparate Tradeoffs. Farming Systems Design 2007 Conference, Catania, Sicily, Italy, September 10-12,2007. Symposium Proceedings, Session 1.6, p150-151.

Interpretive Summary: Evaluating environmental and economic tradeoffs is perhaps the most contentious of all decisions. Decision makers have to make comparisons with incomplete information and with nebulous value systems. This research develops a framework for disparate tradeoffs called the Stakeholder Payoff Matrix (SPM). The traditional payoff matrix utilizes a probability function for management alternatives to represent multiple pieces of information at one time for each system. This allows a decision maker to choose one system over another based on multiple attributes. In this research, we develop the SPM that uses similar features from the payoff matrix. We first demonstrate the ability of the matrix to incorporate multiple attributes, such as economic, social, and environmental. We then discuss the adaptation of several financial risk decision rules to facilitate comparing these attributes. Finally, we demonstrate the SPM with an example of agricultural production systems through the creation of a vector of economic and environmental outcomes (e.g., surface runoff, nitrate in surface runoff, and soil erosion). The result of this research is a tool that allows economic and environmental tradeoffs to be incorporated into a single place that can be adapted to different situations, and thus be used in a variety of contexts while remaining simple to understand. The matrix is flexible and facilitates a variety of methods to compare complex systems, thus providing the freedom to accommodate disparate value systems across different decision makers.

Technical Abstract: One of the most difficult tasks decision makers face is to compare across disparate objectives. Evaluating environmental and economic tradeoffs is perhaps the most contentious of all decisions. Decision makers have to make comparisons with incomplete information and with nebulous value systems. This research introduces a payoff matrix approach adapted from financial risk concepts, and develops a comparable framework for disparate tradeoffs called the Stakeholder Payoff Matrix (SPM). The traditional payoff matrix utilizes a probability function for management alternatives to represent multiple pieces of information at one time for each system (e.g., mean, variance, standard deviation). This allows a decision maker to choose one system over another based on multiple attributes. In this research, we develop the SPM that uses similar features from the payoff matrix. We first demonstrate the ability of the matrix to incorporate multiple attributes, such as economic, social, and environmental. We then discuss the adaptation of several financial decision rules to facilitate comparing these attributes. Finally, we demonstrate the SPM with an example of agricultural production systems through the creation of a vector of economic and environmental outcomes (e.g., surface runoff, nitrate in surface runoff, and soil erosion). The result of this research is a tool that allows economic and environmental tradeoffs to be incorporated into a single place that can be adapted to different situations, and thus be used in a variety of contexts while remaining simple to understand. The matrix is flexible and facilitates a variety of methods to compare complex, multifaceted systems. This flexibility provides freedom to accommodate disparate value systems across different decision makers.