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.

Eliciting farmers’ subjective probabilities, risk, and uncertainty preferences using contextualized field experiments / Cerroni, Simone. - In: AGRICULTURAL ECONOMICS. - ISSN 1574-0862. - ELETTRONICO. - 2020:51(2020), pp. 707-724. [https://doi.org/10.1111/agec.12587]

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

Simone Cerroni
2020

Abstract

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.
51
Cerroni, Simone
Eliciting farmers’ subjective probabilities, risk, and uncertainty preferences using contextualized field experiments / Cerroni, Simone. - In: AGRICULTURAL ECONOMICS. - ISSN 1574-0862. - ELETTRONICO. - 2020:51(2020), pp. 707-724. [https://doi.org/10.1111/agec.12587]
File in questo prodotto:
File Dimensione Formato  
agec.12587.pdf

embargo fino al 11/07/2022

Tipologia: Versione editoriale (Publisher’s layout)
Licenza: Tutti i diritti riservati (All rights reserved)
Dimensione 1.55 MB
Formato Adobe PDF
1.55 MB Adobe PDF Visualizza/Apri

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11572/271471
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 11
  • ???jsp.display-item.citation.isi??? 9
social impact