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A Study on Revenue Insurance Buying for Custard Apple in Taiwan: Perspectives from Prospect Theory and Ambiguity Preference

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  • Yang, Min-Hsien
  • Lu, Richard

Abstract

This paper studies why the demand for Agricultural revenue insurance is so low in Taiwan even the government subsidize almost half of the premium. We look into how risk attitude, probability ambiguity and claim payment ambiguity can affect the lower demand of the insurance, and control factors like age, education, farming experience, scale, and loan borrowing. By the survey data of 199 farmers, we find that half of the sample farmers are kind of risk lovers, and, about half of them haver problem of probability ambiguity or claim payment ambiguity. By using the two-class logistic model of insurance buying or no buying, we find that the risk attitude as risk aversion has significant positive impacts on the insurance buying, or the risk lover has less demand for the insurance. However, the probability ambiguity and claim payment ambiguity, which are expected to have negative impacts on the insurance demand, is not statistically significant.

Suggested Citation

  • Yang, Min-Hsien & Lu, Richard, 2022. "A Study on Revenue Insurance Buying for Custard Apple in Taiwan: Perspectives from Prospect Theory and Ambiguity Preference," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 10(2), April.
    • Handle: RePEc:ags:ijfaec:321779
    DOI: 10.22004/ag.econ.321779
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    References listed on IDEAS

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