Joint Estimation of Risk Preferences and Technology: Flexible Utility of Futility?
AbstractThe present study sets up a thought experiment calibrated to represent risks of a high-risk production activity (farming), and investigating whether the structure of risk aversion (i.e., the changes in absolute or relative risk aversion associated with changes in wealth) can be estimated with reasonable precision. Findings strongly suggest that typical production data are unlikely to allow identification of the structure of risk aversion. A flexible utility parameterization is found to worsen technology parameter estimates. Findings also indicate that even under a restricted utility specification, the quality of utility parameters estimated from small samples is very poor.
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Bibliographic InfoPaper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN with number 9980.
Date of creation: 2007
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expected utility; risk preferences; production analysis; risk attitudes.; Risk and Uncertainty; C13; D24; D81; Q12.;
Other versions of this item:
- Sergio H. Lence, 2007. "Joint Estimation of Risk Preferences and Technology: Flexible Utility or Futility?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(3), pages 581-598.
- Lence, Sergio H., 2009. "Joint Estimation of Risk Preferences and Technology: Flexible Utility or Futility?," Staff General Research Papers 13028, Iowa State University, Department of Economics.
- C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
- D20 - Microeconomics - - Production and Organizations - - - General
- D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
- Q10 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - General
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