Farmers’ Risk and Ambiguity Preferences and Fertilizer Use Behaviors: Experimental Evidence From Taihu Basin in China

Uncertainty in agricultural production often leads to excessive fertilizer use, a major contributor to agricultural non‐point source pollution. This paper studies how farmers’ risk and ambiguity preferences impact their fertilizer use behaviors. We conduct the analysis based on a lab‐in‐the‐field experiment in Taihu, China. The experiment results show that farmers are, on average, risk averse in the gain domain and risk seeking in the loss domain, while being ambiguity seeking in gains and ambiguity averse in losses. They tend to exhibit higher probability distortions—overweighting small probabilities and underweighting large probabilities—in ambiguous contexts. We find that ambiguity aversion has a stronger influence on chemical fertilizer use than risk aversion. Moreover, farmers who are reluctant to use organic fertilizers tend to underestimate the probability of potential benefits. Our results suggest that improving farmers’ cognitive ability could potentially reduce chemical fertilizer use, while increasing household income and expanding cropland size may facilitate the adoption of organic fertilizers.