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Is the risk attitude measured with the Holt and Laury task reflected in farmers’ production risk?

Author

Listed:
  • Elisabeth Vollmer
  • Daniel Hermann
  • Oliver Mußhoff

Abstract

This paper investigates the explanatory power of the risk attitude measured with the Holt and Laury (HL) task for farmers’ production decision behaviour. In order to achieve this, a Just and Pope production function is estimated using panel data of German farmers. The results show that the farmers’ risk attitude elicited using the HL task is correlated with their respective production risk. With higher risk aversion, less production risk is tolerated. Consequently, a neutrally framed HL task is proven to be an appropriate reflection of the risk farmers take in real production decisions.

Suggested Citation

  • Elisabeth Vollmer & Daniel Hermann & Oliver Mußhoff, 2017. "Is the risk attitude measured with the Holt and Laury task reflected in farmers’ production risk?," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 44(3), pages 399-424.
    • Handle: RePEc:oup:erevae:v:44:y:2017:i:3:p:399-424.
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    File URL: http://hdl.handle.net/10.1093/erae/jbx004
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    Citations

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    Cited by:

    1. Bruns, Selina & Hermann, Daniel & Mußhoff, Oliver, 2022. "Investigating inconsistencies in complex lotteries: The role of cognitive skills of low-numeracy subjects," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 97(C).
    2. Fabian Thomas & Estelle Midler & Marianne Lefebvre & Stefanie Engel, 2019. "Greening the common agricultural policy: a behavioural perspective and lab-in-the-field experiment in Germany," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 46(3), pages 367-392.
    3. Kristin Limbach & Anne Rozan & Philipe Coent & Raphaële Préget & Sophie Thoyer, 2023. "Can collective conditionality improve agri-environmental contracts? From lab to field experiments," Review of Agricultural, Food and Environmental Studies, Springer, vol. 104(3), pages 311-340, December.
    4. Buchholz, Matthias & Danne, Michael & Musshoff, Oliver, 2022. "An experimental analysis of German farmers’ decisions to buy or rent farmland," Land Use Policy, Elsevier, vol. 120(C).
    5. Meraner, Manuela & Musshoff, Oliver & Finger, Robert, 2018. "Using involvement to reduce inconsistencies in risk preference elicitation," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 73(C), pages 22-33.
    6. Raman Kachurka & Michał Krawczyk & Joanna Rachubik, 2021. "State lottery in the lab: an experiment in external validity," Experimental Economics, Springer;Economic Science Association, vol. 24(4), pages 1242-1266, December.
    7. Giampietri, Elisa & Yu, Xiaohua & Trestini, Samuele, 2020. "The role of trust and perceived barriers on farmer’s intention to adopt risk management tools," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 9(1), April.
    8. Patil, V. & Veettil, P.C., 2018. "Experimental Evidence of Risk Attitude of Farmers from Risk-Preference Elicitation in India," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277331, International Association of Agricultural Economists.
    9. Hasibuan, Abdul Muis & Gregg, Daniel & Stringer, Randy, 2022. "Risk preferences, intra-household dynamics and spatial effects on chemical inputs use: Case of small-scale citrus farmers in Indonesia," Land Use Policy, Elsevier, vol. 122(C).
    10. Lefebvre, Marianne & Midler, Estelle & Bontems, Philippe, 2020. "Adoption of environmentally-friendly agricultural practices with background risk: experimental evidence," TSE Working Papers 20-1079, Toulouse School of Economics (TSE).
    11. Huiyue Diao & Majid Ghorbani, 2018. "Production risk caused by human factors: a multiple case study of thermal power plants," Frontiers of Business Research in China, Springer, vol. 12(1), pages 1-27, December.

    More about this item

    Keywords

    farmers’ risk attitude; Holt and Laury task; experimental economics; production risk; panel data;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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