Effects of Household Shocks on Risk Preferences and Loss Aversion: Evidence from Upland Smallholders of South East Asia

Sagemüller, Frederik; Mußhoff, Oliver

doi:10.1080/00220388.2020.1736280

Cited by 16 publications

(6 citation statements)

References 60 publications

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“…The modification of Bocquého et al (2014) consisted of multiplying the lottery stakes by 10 and deleting two rows from the first price list. The Tanaka et al (2010) task has been used in other studies with farmers (e.g., Bougherara et al, 2017;Liu, 2013;Sagemüller & Mußhoff, 2020;Villacis et al, 2021) rather than picking a lottery row by row as in Holt and Laury (2002), prevents multiple switches. Therefore, without having to discard inconsistent responses, the task enforces monotonicity, which allows us to approximate CPT parameters per respondent based on their switching points by the so-called mid-point approach (Tanaka et al, 2010).…”

Section: Theory Experimental Design Data and Estimation Strategymentioning

confidence: 99%

“…The modification of Bocquého et al (2014) consisted of multiplying the lottery stakes by 10 and deleting two rows from the first price list. The Tanaka et al (2010) task has been used in other studies with farmers (e.g., Bougherara et al, 2017; Liu, 2013; Sagemüller & Mußhoff, 2020; Villacis et al, 2021), but Bocquého et al (2014) is one of the few studies dealing with CPT in European agriculture (see Bonjean, 2022 or Kreft et al, 2021 for other European examples). In each of the three multiple price lists (cf.…”

Section: Theory Experimental Design Data and Estimation Strategymentioning

confidence: 99%

See 1 more Smart Citation

Farmers' risk preferences in 11 European farming systems: A multi‐country replication of Bocquého et al. (2014)

Rommel

Sagebiel

Baaken

et al. 2022

Applied Eco Perspectives Pol

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We replicate Bocquého et al. (2014), who used multiple price lists to investigate the risk preferences of 107 French farmers. We collected new data from 1430 participants in 11 European farming systems. In agreement with the original study, farmers' risk preferences are best described by Cumulative Prospect Theory.The views expressed are purely those of the authors and may not, in any circumstances, be regarded as stating an official position of the European Commission.

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Section: Theory Experimental Design Data and Estimation Strategymentioning

confidence: 99%

“…The modification of Bocquého et al (2014) consisted of multiplying the lottery stakes by 10 and deleting two rows from the first price list. The Tanaka et al (2010) task has been used in other studies with farmers (e.g., Bougherara et al, 2017; Liu, 2013; Sagemüller & Mußhoff, 2020; Villacis et al, 2021), but Bocquého et al (2014) is one of the few studies dealing with CPT in European agriculture (see Bonjean, 2022 or Kreft et al, 2021 for other European examples). In each of the three multiple price lists (cf.…”

Section: Theory Experimental Design Data and Estimation Strategymentioning

confidence: 99%

Farmers' risk preferences in 11 European farming systems: A multi‐country replication of Bocquého et al. (2014)

Rommel

Sagebiel

Baaken

et al. 2022

Applied Eco Perspectives Pol

View full text Add to dashboard Cite

show abstract

“…We explain this deviation from our results by the fact that these studies did not show the objective probability to participants, which can be expected to increase the effect of heuristics (Kahneman, 2011). Sagemüller and Mußhoff (2020) found no strong evidence that the absence of shocks affects probability weighting. Freudenreich et al.…”

Section: Resultsmentioning

confidence: 99%

“…Existing agricultural economic studies have explored imitation (Conley & Udry, 2010;Maertens, 2017;Takahashi et al, 2019) 3 or the effect of shock experience (for an overview see , using a prospect theory framework in lottery games (Freudenreich et al, 2017;Sagemüller & Mußhoff, 2020). However, we know of no study that has explored imitation, shock experience, or threshold of concern heuristics in agriculture using a 2 For details on the terminology of artefactual and framed field experiments see Harrison & List (2004).…”

Section: Introductionmentioning

confidence: 99%

Dealing with low‐probability shocks: The role of selected heuristics in farmers’ risk management decisions

Duden

Mußhoff

Offermann

2023

Agricultural Economics

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Dealing with weather extremes is a major challenge for farmers and often comes at high costs for public budgets. Therefore, we investigate the influence of specific simplified decision rules, so-called heuristics, on farmers' willingness to pay (WTP) for protecting themselves against low-probability and high-consequence weather shocks. To this end, we conducted a framed field experiment with 237 farmers in Germany, using incentivized lottery-based multiple price lists. We explored the effects of different heuristics within the prospect theory framework. Our results indicate that, on average, farmers exhibit risk-loving behavior towards monetary losses, leading to a low WTP for risk mitigation. The results also suggest that the imitation heuristic, shock experience heuristics, and the threshold of concern heuristic influence farmers' WTP. Farmers specifically imitate successful farmers when these are risk-loving. The lack of personal experience with low-probability events induces farmers to assign less weight to low-probability shocks, which lowers their WTP. Farmers also systematically assign less weight to low-probability shocks that they consider "too rare to be concerned about." Accounting for the use of these heuristics can help design improved risk management instruments and policies.

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“…An ongoing discourse revolves around determining theoretical models for farmers' risk preferences and the most effective experimental designs for predicting real‐world behavior (Bocquého et al, 2014; Finger et al, 2023; Menapace et al, 2016; Meraner et al, 2018; Rommel et al, 2019). While early investigations into farmers' risk preferences (Binswanger, 1980) were exclusively rooted in expected utility theory (EUT, von Neumann & Morgenstern, 1947), there is a growing tendency toward behavioral economic models (e.g., Bocquého et al, 2014; Cerroni, 2020; Sagemüller & Mußhoff, 2020; Villacis et al, 2021).…”

Section: Introductionmentioning

confidence: 99%

An experiment on the link between risk preferences and the willingness to become a farmer

Nainggolan,

Rommel

2023

J of Agr & App Econ Assoc

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This study investigates the link between risk preferences of agricultural students and their willingness to become a farmer. We conducted an incentivized experiment with 577 students of an agricultural university in Indonesia. Discriminating between alternative theories of decision‐making under risk, we find that students' risk preferences behave in accordance with cumulative prospect theory, but risk preferences are not predictive of students' willingness to become a farmer. Framing the experimental lottery task in either an agricultural or a general entrepreneurship context does not alter the predictive power for the willingness to become a farmer. Our results contribute to the debates on risk and farm generational renewal, as well as the (lack of) parallelism in behavioral field experiments.

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Effects of Household Shocks on Risk Preferences and Loss Aversion: Evidence from Upland Smallholders of South East Asia

Cited by 16 publications

References 60 publications

Farmers' risk preferences in 11 European farming systems: A multi‐country replication of Bocquého et al. (2014)

Farmers' risk preferences in 11 European farming systems: A multi‐country replication of Bocquého et al. (2014)

Dealing with low‐probability shocks: The role of selected heuristics in farmers’ risk management decisions

An experiment on the link between risk preferences and the willingness to become a farmer

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