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Are peasants risk-averse decision makers?

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  • Joseph Henrich
  • Richard McElreath

Abstract

Evidence shows that real-effort investments can affect bilateral bargaining outcomes. This paper investigates whether similar investments can inhibit equilibrium convergence of experimental markets. In one treatment, sellers’ relative effort affects the allocation of production costs, but a random productivity shock ensures that the allocation is not necessarily equitable. In another treatment, sellers’ effort increases the buyers’ valuation of a good. We find that effort investments have a short-lived impact on trading behavior when sellers’ effort benefits buyers, but no effect when effort determines cost allocation. Efficiency rates are high and do not differ across treatments.

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File URL: http://karlan.yale.edu/fieldexperiments/papers/00066.pdf
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Bibliographic Info

Paper provided by The Field Experiments Website in its series Artefactual Field Experiments with number 00066.

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Date of creation: 2002
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Handle: RePEc:feb:artefa:00066

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Web page: http://www.fieldexperiments.com

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  1. Camerer, Colin & Weber, Martin, 1992. " Recent Developments in Modeling Preferences: Uncertainty and Ambiguity," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 325-70, October.
  2. Hans Binswanger, 1980. "Attitudes toward risk: Experimental measurement in rural india," Artefactual Field Experiments 00009, The Field Experiments Website.
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