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Agricultural Insurance and Bounded Rationality

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  • Křečková, J.
  • Brožová, H.

Abstract

Bounded rationality influences the individuals making decisions. Rationality of decisions is limited by the complexity of the decision problem, the cognitive limitations of decision makers, and the time available to make the decision. One specific case of this situation is decision on the agricultural insurance. The success of agricultural activity is highly dependent on environmental influences in the region. These risks can destroy entire harvest or exterminate a whole herd of livestock. The Czech Republic, through the Support and Guarantee Fund for Farmers and Forestry, provides farmers and forest managers with a contribution to cover the costs of the payment of insurance against unforeseen damage for already several years by which it affects decision-making about insurance. The article discusses the rationality of decision on the agricultural insurance using decision model under risk.

Suggested Citation

  • Křečková, J. & Brožová, H., 2017. "Agricultural Insurance and Bounded Rationality," AGRIS on-line Papers in Economics and Informatics, Czech University of Life Sciences Prague, Faculty of Economics and Management, vol. 9(1), March.
    • Handle: RePEc:ags:aolpei:262452
    DOI: 10.22004/ag.econ.262452
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    References listed on IDEAS

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    1. Herbert A. Simon, 1955. "A Behavioral Model of Rational Choice," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 69(1), pages 99-118.
    2. Stigler, George J., 2011. "Economics of Information," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 5, pages 35-49.
    3. Rubinstein, Ariel, 1988. "Similarity and decision-making under risk (is there a utility theory resolution to the Allais paradox?)," Journal of Economic Theory, Elsevier, vol. 46(1), pages 145-153, October.
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