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Are risk preferences consistent across elicitation procedures ? A field experiment in Congo Basin countries

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  • Marielle Brunette

    (BETA - Bureau d'Économie Théorique et Appliquée - AgroParisTech - UNISTRA - Université de Strasbourg - Université de Haute-Alsace (UHA) - Université de Haute-Alsace (UHA) Mulhouse - Colmar - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, Climate Economics Chair - Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres)

  • Jonas Ngouhouo-Poufoun

    (BETA - Bureau d'Économie Théorique et Appliquée - AgroParisTech - UNISTRA - Université de Strasbourg - Université de Haute-Alsace (UHA) - Université de Haute-Alsace (UHA) Mulhouse - Colmar - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CIFOR - Center for International Forestry Research - CGIAR - Consultative Group on International Agricultural Research [CGIAR])

Abstract

We compare individual risk preferences elicited through a classic Ordered Lottery Selection (OLS) procedure with five gambles, and an extended procedure composed of nine gambles. The research question is about the stability of the risk preferences across these two elicitation variants. We implemented a field experiment with 1002 rural households in the Congo Basin from December 2013 to July 2014. We show that 1/3 of the sample is extremely risk averse regardless of the procedure. We found inconsistencies in risk preferences elicited across procedures. Indeed, 45.71% are characterized by instability of preferences, either weak (34.53%) or strong (11.18%); 42.81% of the sample exhibits stable preferences and the remaining 11.48% of the sample-initially risk neutral in the classic procedure-is classified as risk loving in the extended procedure. Undereducation can be seen as the main driver of the strong instability since the incremental change brought about by the attainment of secondary school on the likelihood to remain stable is ten times greater than the other considered drivers.

Suggested Citation

  • Marielle Brunette & Jonas Ngouhouo-Poufoun, 2021. "Are risk preferences consistent across elicitation procedures ? A field experiment in Congo Basin countries," Working Papers hal-03132834, HAL.
    • Handle: RePEc:hal:wpaper:hal-03132834
    DOI: 10.1057/s10713-021-00062-7
    Note: View the original document on HAL open archive server: https://hal.inrae.fr/hal-03132834
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    1. Strobl, Renate, 2022. "Background risk, insurance and investment behaviour: Experimental evidence from Kenya," Journal of Economic Behavior & Organization, Elsevier, vol. 202(C), pages 34-68.

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    Keywords

    Field experiment; Risk aversion; Ordered lottery selection; Preferences; Farmers;
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