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Risk Perception And The Analysis Of Risk Attitudes

Listed author(s):
  • John Quiggin

Risk has long been recognised as an important feature of the environment facing farmers. In recent years the von Neumann-Morgenstern expected utility theory has been used to analyse decision making under risk. However, many people behave in a manner inconsistent with the expected utility theory. One widely suggested explanation is based on subjective probability distortion. A number of attempts to incorporate this phenomenon into utility theories have been made. In this paper, the problems of analysing subjective probability distortion are discussed. Evidence from a survey of farmers' risk attitudes undertaken in conjunction with the 1977 BAE Australian Agricultural and Grazing Industries Survey is analysed in the light of this discussion.

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File URL: http://hdl.handle.net/10.1111/j.1467-8489.1981.tb00393.x
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Article provided by Australian Agricultural and Resource Economics Society in its journal Australian Journal of Agricultural and Resource Economics.

Volume (Year): 25 (1981)
Issue (Month): 2 (08)
Pages: 160-169

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Handle: RePEc:bla:ajarec:v:25:y:1981:i:2:p:160-169
DOI: j.1467-8489.1981.tb00393.x
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  1. Dillon, John L., 1971. "An Expository Review of Bernoullian Decision Theory in Agriculture: Is Utility Futility?," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 39(01), March.
  2. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-291, March.
  3. Anderson, Jock R. & Feder, Gershon, 2007. "Agricultural Extension," Handbook of Agricultural Economics, Elsevier.
  4. Handa, Jagdish, 1977. "Risk, Probabilities, and a New Theory of Cardinal Utility," Journal of Political Economy, University of Chicago Press, vol. 85(1), pages 97-122, February.
  5. Milton Friedman & L. J. Savage, 1948. "The Utility Analysis of Choices Involving Risk," Journal of Political Economy, University of Chicago Press, vol. 56, pages 279-279.
  6. Quiggin, John, 1982. "A theory of anticipated utility," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 323-343, December.
  7. Bond, Gary E. & Wonder, Bernard, 1980. "Risk Attitudes Amongst Australian Farmers," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 24(01), April.
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