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Stability of Risk Preference Measures: Results From a Field Experiment on French Farmers

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  • Arnaud Reynaud
  • Stephane Couture

Abstract

We compare three different elicitation methods for measuring risk attitudes of French farmers in a field experiment setting. We consider two experiments based on the lottery choices initially proposed by Holt and Laury (2002) and by Eckel and Grossman (2002,2008), a risk-taking psychological questionnaire and a self-reporting of perceived risk attitudes for different domains. The main empirical results from this within-subject study are the following. First, within the class of lottery choices, risk preference measures are affected by the type of mechanism used. In particular, farmers appear to be more risk averse using the Eckel and Grossman lottery than using the Holt and Laury one. However attitudes towards risk are significantly correlated across lotteries which means that the ranking of risk preferences seems to be preserved. Second, risk preferences appear to be context-dependent. French farmers are highly risk averse for decisions belonging to financial and ethical domains. They report a higher willingness to take risk for professional decisions. Lastly, using the psychological questionnaire, we find that the risk attitude elicited through lottery choices often correlates with risk attitude toward investments. These findings contribute to the literature which addresses the stability of risk preferences across elicitation methods.

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Paper provided by LERNA, University of Toulouse in its series LERNA Working Papers with number 10.10.316.

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Date of creation: May 2010
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Handle: RePEc:ler:wpaper:10.10.316

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Cited by:
  1. Necker, Sarah & Ziegelmeyer, Michael, 2014. "Household Risk Taking after the Financial Crisis," MEA discussion paper series 14279, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
  2. Andrea Leuermann & Sarah Necker, 2011. "Intergenerational Transmission of Risk Attitudes: A Revealed Preference Approach," SOEPpapers on Multidisciplinary Panel Data Research 412, DIW Berlin, The German Socio-Economic Panel (SOEP).
  3. Paolo Crosetto & Antonio Filippin, 2013. "A Theoretical and Experimental Appraisal of Five Risk Elicitation Methods," Jena Economic Research Papers 2013-009, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  4. Charness, Gary & Gneezy, Uri & Imas, Alex, 2013. "Experimental methods: Eliciting risk preferences," Journal of Economic Behavior & Organization, Elsevier, vol. 87(C), pages 43-51.
  5. Bocqueho, Geraldine & Jacquet, Florence & Reynaud, Arnaud, 2011. "Expected Utility or Prospect Theory Maximizers? Results from a Structural Model based on Field-experiment Data," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114257, European Association of Agricultural Economists.
  6. Ihli, Hanna Julia & Chiputwa, Brian & Musshoff, Oliver, 2013. "Do Changing Probabilities or Payoffs in Lottery-Choice Experiments Matter? Evidence from Rural Uganda," Discussion Papers 158146, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development.
  7. Martijn Boermans & Daan Willebrands, 2012. "Financial constraints, risk taking and firm performance: Recent evidence from microfinance clients in Tanzania," DNB Working Papers 358, Netherlands Central Bank, Research Department.
  8. Herberich David & John List, 2012. "Digging into background risk: Experiments with farmers and students," Framed Field Experiments 00157, The Field Experiments Website.
  9. Coppola, Michela, 2014. "Eliciting risk-preferences in socio-economic surveys: How do different measures perform?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 48(C), pages 1-10.
  10. Vieider, Ferdinand M. & Truong, Nghi & Martinsson, Peter & Pham Khanh Nam & Martinsson, Peter, 2013. "Risk preferences and development revisited: A field experiment in Vietnam," Discussion Papers, WZB Junior Research Group Risk and Development SP II 2013-403, Social Science Research Center Berlin (WZB).
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  12. Maart, Syster Christin & Musshoff, Oliver & Ewald, Jorn, 2012. "Ermittlung Der Individuellen Risikoeinstellung: Vergleich Verschiedener Methoden Und Personengruppen," 52nd Annual Conference, Stuttgart, Germany, September 26-28, 2012 137384, German Association of Agricultural Economists (GEWISOLA).
  13. Douadia Bougherara & Xavier Gassmann & Laurent Piet, 2011. "A structural estimation of French farmers’ risk preferences: an artefactual field experiment," Working Papers SMART - LERECO 11-06, INRA UMR SMART.
  14. Leuermann, Andrea & Necker, Sarah, 2011. "Intergenerational transmission of risk attitudes: A revealed preference approach," Freiburg Discussion Papers on Constitutional Economics 11/4, Walter Eucken Institut e.V..

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