Contextual Framing and Monetary Incentives in Field Experiments on Risk Preferences: Evidence from German Farmers

Rommel, Jens; Hermann, Daniel; Müller, Malte; Mußhoff, Oliver

doi:10.1111/1477-9552.12298

Cited by 28 publications

(25 citation statements)

References 46 publications

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“…Sanou, Liverpool-Tasie, and Shupp (2018) reached the same conclusion using an incentivized CE MPL within a contextualized field experiment that was conducted in Nigeria. In contrast, Rommel et al (2019) found that insurance choices were not correlated with risk preferences elicited via contextualized and noncontextualized framings of the MPL. In this paper, a contextualized CE MPL was used.…”

Section: Eliciting Risk Preferencesmentioning

confidence: 64%

“…Recently, few studies attempted the use of contextualized field experiments. Results on the effect of contextual framing on external validity of elicited preferences and farmers' understanding of experimental tasks and instructions are mixed (e.g., Rommel, Hermann, & Musshoff, 2017;Rommel, Hermann, Muller, & Musshoff, 2019). This suggests that the use of contextualized field experiments needs further investigation.…”

Section: Introductionmentioning

confidence: 99%

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Eliciting farmers’ subjective probabilities, risk, and uncertainty preferences using contextualized field experiments

Cerroni

2020

Agricultural Economics

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Subjective probabilities as well as risk and uncertainty preferences influence many farmers’ decisions. Few contextualized field experiments were recently conducted to elicit farmers’ risk preferences. Contextualized field experiments use nonabstract framings that are familiar to subjects. Despite adding of context can undermine internal validity, such experiments are increasingly used in applied economics. Contextualized field experiments were never used to elicit farmers’ uncertainty preferences. This paper aims to fill this gap in the literature. This required the development of a new approach in which uncertainty preferences were estimated while controlling for farmers’ subjective probabilities regarding future agricultural outcomes. The experiment involves Scottish farmers’ decisions to plant traditional or new potato varieties. Monetary incentives and incentive compatible elicitation techniques, such as quadratic scoring rules and certainty equivalent multiple price lists, were used. Results from the estimation of Fechner models using maximum likelihood estimation procedures show that failure to control for subjective probabilities generates an underestimation of estimated uncertainty preferences. Farmers are more averse to uncertainty than risk, and their choices are noisier under uncertainty than risk.

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Section: Eliciting Risk Preferencesmentioning

confidence: 64%

Section: Introductionmentioning

confidence: 99%

Eliciting farmers’ subjective probabilities, risk, and uncertainty preferences using contextualized field experiments

Cerroni

2020

Agricultural Economics

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“…In order to determine the sample size requirements for each game, we conducted power analyses to obtain the optimal number of observations required for each game [ 63 , 66 , 68 – 75 ]. The a priori power analysis required a minimum of 164 subjects for paired games: Dictator game, Trust game, Double Auction, and Ultimatum game, (82 per role) and a minimum of 82 subjects for the Public goods game and for the individual games: Holt and Laury, Eckel and Grossman, and Cheating game to have 80% power and a medium effect size (Cohen’s D = 0.50) using G*Power.…”

Section: Experimental Designmentioning

confidence: 99%

Does eye-tracking have an effect on economic behavior?

et al. 2021

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Eye-tracking is becoming an increasingly popular tool for understanding the underlying behavior driving human decisions. However, an important unanswered methodological question is whether the use of an eye-tracking device itself induces changes in participants’ behavior. We study this question using eight popular games in experimental economics chosen for their varying levels of theorized susceptibility to social desirability bias. We implement a simple between-subject design where participants are randomly assigned to either a control or an eye-tracking treatment. In seven of the eight games, eye-tracking did not produce different outcomes. In the Holt and Laury risk assessment (HL), subjects with multiple calibration attempts demonstrated more risk averse behavior in eye-tracking conditions. However, this effect only appeared during the first five (of ten) rounds. Because calibration difficulty is correlated with eye-tracking data quality, the standard practice of removing participants with low eye-tracking data quality resulted in no difference between the treatment and control groups in HL. Our results suggest that experiments may incorporate eye-tracking equipment without inducing changes in the economic behavior of participants, particularly after observations with low quality eye-tracking data are removed.

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“…An explorative study with Swedish farmers (Labajova, 2018) and exploratory interviews with German farmers guided the experimental design, specifically with respect to framing the decision in a familiar context to enhance external validity and comprehension (cf. Meraner et al, 2018;Rommel et al, 2017Rommel et al, , 2019. In an artifactual field experiment, non-student subjects are recruited for participation in an experiment which may help to identify differences in behavior across subject pools and the sensitivity of behavior to context (Cason and Wu, 2019;Rahwan et al, 2019).…”

Section: Experimental Design To Measure Illusion Of Controlmentioning

confidence: 99%

Illusion of control in farmers’ investment and financing decisions

Labajova¹,

Höhler

Lagerkvist

et al. 2021

AFR

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PurposePeople’s tendency to overestimate their ability to control random events, known as illusion of control, can affect financial decisions under uncertainty. This study developed an artifactual field experiment on illusion of control for a farm machinery investment.Design/methodology/approachIn an experiment with two treatments, the individual farmer was either given or not given a sense of control over a random outcome. After each decision, the authors elicited perceived control, and a questionnaire collected additional indirect measures of illusion of control from 78 German farmers and 10 farm advisors.FindingsThe results did not support preregistered hypotheses of the presence of illusion of control. This null result was robust over multiple outcomes and model specifications. The findings demonstrate that cognitive biases may be small and difficult to replicate.Research limitations/implicationsThe sample is not representative for the German farming population. The authors discuss why the estimated treatment effect may represent a lower bound of the true effect.Originality/valueIllusion of control is well-studied in laboratory settings, but little is known about the extent to which farmers’ behavior is influenced by illusion of control.

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Contextual Framing and Monetary Incentives in Field Experiments on Risk Preferences: Evidence from German Farmers

Cited by 28 publications

References 46 publications

Eliciting farmers’ subjective probabilities, risk, and uncertainty preferences using contextualized field experiments

Eliciting farmers’ subjective probabilities, risk, and uncertainty preferences using contextualized field experiments

Does eye-tracking have an effect on economic behavior?

Illusion of control in farmers’ investment and financing decisions

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