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Expected utility or prospect theory maximisers? Assessing farmers' risk behaviour from field-experiment data

Bocquého, Géraldine, Jacquet, Florence and Reynaud, Arnaud (2014) Expected utility or prospect theory maximisers? Assessing farmers' risk behaviour from field-experiment data. European Review of Agricultural Economics, 41 (n°1). pp. 135-172.

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Official URL: http://tse-fr.eu/pub/30611

Abstract

We elicit the risk preferences of a sample of French farmers in a field-experiment setting, considering both expected utility and cumulative prospect theory. Under the EU framework, our results show that farmers are characterised by a concave utility function for gain outcomes implying risk aversion. The CPT framework confirms this result, but also suggests that farmers are twice as sensitive to losses as to gains and tend to pay undue attention to unlikely extreme outcomes. Accounting for loss aversion and probability weighting can make a difference in the design of effective and efficient policies, contracts or insurance schemes.

Item Type: Article
Language: English
Date: 2014
Refereed: Yes
Uncontrolled Keywords: Risk preferences, Experimental economics, Loss aversion, Probability weighting, France
JEL codes: C93 - Field Experiments
D81 - Criteria for Decision-Making under Risk and Uncertainty
Q12 - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 25 Aug 2016 12:20
Last Modified: 07 Mar 2018 13:23
OAI ID: oai:tse-fr.eu:30611
URI: http://publications.ut-capitole.fr/id/eprint/22264

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