IDEAS home Printed from https://ideas.repec.org/p/ags/aaea12/124471.html
   My bibliography  Save this paper

Measuring Risk Attitude and Relation to Marketing Behavior

Author

Listed:
  • Franken, Jason R.V.
  • Pennings, Joost M.E.
  • Garcia, Philip

Abstract

Researchers employ various measures of risk attitudes to investigate their relation to market behavior with mixed results. We find that a higher-order global risk attitude construct, developed using survey scales and experiments based on expected utility theory, is related to several marketing alternatives, but does not exhibit substantially greater explanatory power than underlying measures. With few exceptions, scales yield greater significance of risk attitudes for these choices, but experimental measures reveal other insights, e.g., differential attitudes in gain and loss domains. Given recent concerns with experimental measures in the literature, we suggest studies include scales as a low cost supplemental measure.

Suggested Citation

  • Franken, Jason R.V. & Pennings, Joost M.E. & Garcia, Philip, 2012. "Measuring Risk Attitude and Relation to Marketing Behavior," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124471, Agricultural and Applied Economics Association.
  • Handle: RePEc:ags:aaea12:124471
    DOI: 10.22004/ag.econ.124471
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/124471/files/AAEA%202012%20Selected%20Paper%202_%20Measures%20of%20Risk%20Attitude%20and%20Relation%20to%20Market%20Behavior.pdf
    Download Restriction: no

    File URL: https://libkey.io/10.22004/ag.econ.124471?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Fellner, Gerlinde & Maciejovsky, Boris, 2007. "Risk attitude and market behavior: Evidence from experimental asset markets," Journal of Economic Psychology, Elsevier, vol. 28(3), pages 338-350, June.
    2. Glynn T. Tonsor & Ted C. Schroeder & Joost M. E. Pennings, 2009. "Factors Impacting Food Safety Risk Perceptions," Journal of Agricultural Economics, Wiley Blackwell, vol. 60(3), pages 625-644, September.
    3. Daniel A. Ackerberg & Maristella Botticini, 2002. "Endogenous Matching and the Empirical Determinants of Contract Form," Journal of Political Economy, University of Chicago Press, vol. 110(3), pages 564-591, June.
    4. Pope, Kelsey Frasier & Schroeder, Ted C. & Langemeier, Michael R. & Herbel, Kevin L., 2011. "Cow-Calf Producer Risk Preference Impacts on Retained Ownership Strategies," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 43(4), pages 497-513, November.
    5. David R. Just & Travis J. Lybbert, 2012. "A Generalized Measure of Marginal Risk Aversion: Experimental Evidence from India and Morocco," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(2), pages 444-450.
    6. Sartwelle, James D., III & O'Brien, Daniel M. & Tierney, William I., Jr. & Eggers, Tim, 2000. "The Effect Of Personal And Farm Characteristics Upon Grain Marketing Practices," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 32(1), pages 1-17, April.
    7. Lisa Anderson & Jennifer Mellor, 2009. "Are risk preferences stable? Comparing an experimental measure with a validated survey-based measure," Journal of Risk and Uncertainty, Springer, vol. 39(2), pages 137-160, October.
    8. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-291, March.
    9. David R. Just & Sivalai V. Khantachavana & Richard E. Just, 2010. "Empirical Challenges for Risk Preferences and Production," Annual Review of Resource Economics, Annual Reviews, vol. 2(1), pages 13-31, October.
    10. Luis H. B. Braido, 2008. "Evidence on the Incentive Properties of Share Contracts," Journal of Law and Economics, University of Chicago Press, vol. 51(2), pages 327-349, May.
    11. Joost M.E. Pennings & Ale Smidts, 2000. "Assessing the Construct Validity of Risk Attitude," Management Science, INFORMS, vol. 46(10), pages 1337-1348, October.
    12. Lee Cronbach, 1951. "Coefficient alpha and the internal structure of tests," Psychometrika, Springer;The Psychometric Society, vol. 16(3), pages 297-334, September.
    13. Mohammed Abdellaoui & Han Bleichrodt & Corina Paraschiv, 2007. "Loss Aversion Under Prospect Theory: A Parameter-Free Measurement," Management Science, INFORMS, vol. 53(10), pages 1659-1674, October.
    14. Ani L. Katchova & Mario J. Miranda, 2004. "Two-Step Econometric Estimation of Farm Characteristics Affecting Marketing Contract Decisions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(1), pages 88-102.
    15. Just, David R., 2011. "Calibrating the wealth effects of decoupled payments: Does decreasing absolute risk aversion matter?," Journal of Econometrics, Elsevier, vol. 162(1), pages 25-34, May.
    16. Jason R.V. Franken & Joost M. E. Pennings & Philip Garcia, 2012. "Crop Production Contracts and Marketing Strategies: What Drives Their Use?," Agribusiness, John Wiley & Sons, Ltd., vol. 28(3), pages 324-340, June.
    17. Nigel Key & William McBride, 2003. "Production Contracts and Productivity in the U.S. Hog Sector," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(1), pages 121-133.
    18. Joost M.E. Pennings & Philip Garcia, 2001. "Measuring Producers' Risk Preferences: A Global Risk-Attitude Construct," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(4), pages 993-1009.
    19. Binswanger, Hans P, 1981. "Attitudes toward Risk: Theoretical Implications of an Experiment in Rural India," Economic Journal, Royal Economic Society, vol. 91(364), pages 867-890, December.
    20. Sartwelle, James & O'Brien, Daniel & Tierney, William & Eggers, Tim, 2000. "The Effect of Personal and Farm Characteristics upon Grain Marketing Practices," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 32(1), pages 95-111, April.
    21. Cragg, John G, 1971. "Some Statistical Models for Limited Dependent Variables with Application to the Demand for Durable Goods," Econometrica, Econometric Society, vol. 39(5), pages 829-844, September.
    22. Christopher G. Davis & Jeffrey M. Gillespie, 2007. "Factors Affecting the Selection of Business Arrangements by U.S. Hog Farmers," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 29(2), pages 331-348.
    23. Joost M. E. Pennings & Ale Smidts, 2003. "The Shape of Utility Functions and Organizational Behavior," Management Science, INFORMS, vol. 49(9), pages 1251-1263, September.
    24. Jean-Paul Chavas & Matthew T. Holt, 1990. "Acreage Decisions Under Risk: The Case of Corn and Soybeans," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(3), pages 529-538.
    25. David R. Just & Hikaru Hanawa Peterson, 2010. "Is Expected Utility Theory Applicable? A Revealed Preference Test," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(1), pages 16-27.
    26. Marc F. Bellemare & Zachary S. Brown, 2010. "On the (Mis)Use of Wealth as a Proxy for Risk Aversion," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(1), pages 273-282.
    27. Fausti, Scott W. & Gillespie, Jeffrey M., 2006. "Measuring risk attitude of agricultural producers using a mail survey: how consistent are the methods?," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(2), pages 1-18, June.
    28. Ale Smidts, 1997. "The Relationship Between Risk Attitude and Strength of Preference: A Test of Intrinsic Risk Attitude," Management Science, INFORMS, vol. 43(3), pages 357-370, March.
    29. Darren Hudson & Keith Coble & Jayson Lusk, 2005. "Consistency of risk premium measures," Agricultural Economics, International Association of Agricultural Economists, vol. 33(1), pages 41-49, July.
    30. B.I. Shapiro & B. Wade Brorsen, 1988. "Factors Affecting Farmers' Hedging Decisions," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 10(2), pages 145-153.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jason R.V. Franken & Joost M.E. Pennings & Philip Garcia, 2014. "Measuring the effect of risk attitude on marketing behavior," Agricultural Economics, International Association of Agricultural Economists, vol. 45(5), pages 525-535, September.
    2. Vassalos, Michael & Li, Yingbo, 2016. "Assessing the Impact of Fresh Vegetable Growers’ Risk Aversion Levels and Risk Preferences on the Probability of Adopting Marketing Contracts: A Bayesian Approach," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 19(1), pages 1-18, February.
    3. Jason R.V. Franken & Joost M.E. Pennings & Philip Garcia, 2017. "Risk attitudes and the structure of decision†making: evidence from the Illinois hog industry," Agricultural Economics, International Association of Agricultural Economists, vol. 48(1), pages 41-50, January.
    4. Frasa, Stefanie & Carlberg, Jared & Hogan, Robert, 2015. "Use of Contracts by Prairie Agricultural Producers," Working Papers 232328, Structure and Performance of Agriculture and Agri-products Industry (SPAA).
    5. Aymeric Ricome & Arnaud Reynaud, 2022. "Marketing contract choices in agriculture: The role of price expectation and price risk management," Agricultural Economics, International Association of Agricultural Economists, vol. 53(1), pages 170-186, January.
    6. Carrer, Marcelo José & Silveira, Rodrigo Lanna F. & Meirelles De Souza Filho, Hildo, 2017. "Citrus Producers' Choice of Price Risk Management Tools," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258352, Agricultural and Applied Economics Association.
    7. Michael Vassalos & Wuyang Hu & Timothy Woods & Jack Schieffer & Carl Dillon, 2016. "Risk Preferences, Transaction Costs, and Choice of Marketing Contracts: Evidence from a Choice Experiment with Fresh Vegetable Producers," Agribusiness, John Wiley & Sons, Ltd., vol. 32(3), pages 379-396, July.
    8. Georgalos, Konstantinos & Paya, Ivan & Peel, David A., 2021. "On the contribution of the Markowitz model of utility to explain risky choice in experimental research," Journal of Economic Behavior & Organization, Elsevier, vol. 182(C), pages 527-543.
    9. Franken, Jason R.V. & Pennings, Joost M.E., 2009. "What Drives How Much Crop Producers Sell in Spot, Forward, and Futures Markets?," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49237, Agricultural and Applied Economics Association.
    10. Feil, J.-H. & Anastassiadis, F. & Mußhoff, O. & Schilling, P., 2015. "Analysing Farmers’ Use of Price Hedging Instruments: An Experimental Approach," Proceedings “Schriften der Gesellschaft für Wirtschafts- und Sozialwissenschaften des Landbaues e.V.”, German Association of Agricultural Economists (GEWISOLA), vol. 50, March.
    11. Pennings, Joost M.E. & Garcia, Philip, 2004. "Strategic Risk Management Behavior: What Can Utility Functions Tell Us?," 2004 Annual meeting, August 1-4, Denver, CO 20388, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    12. Caroline Roussy & Aude Ridier & Karim Chaib & Marie Boyet, 2018. "Marketing contracts and risk management for cereal producers," Agribusiness, John Wiley & Sons, Ltd., vol. 34(3), pages 616-630, June.
    13. Kalogeras, Nikos & Pennings, Joost M.E. & Garcia, Philip, 2006. "What Drives Strategic Behavior? A Framework to Explain and Predict SMEs' Transition to Sustainable Production Systems," 2006 Annual meeting, July 23-26, Long Beach, CA 21354, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    14. Roussy, Caroline & Rider, Aude & Chaib, Karim & Boyet, Marie, 2017. "Marketing Contracts and Risk Management for Cereal Producers," 2017 International Congress, August 28-September 1, 2017, Parma, Italy 261106, European Association of Agricultural Economists.
    15. Williams, John & Malcolm, Bill, 2012. "Farmer decisions about selling wheat and managing wheat price risk in Australia," Australasian Agribusiness Review, University of Melbourne, Department of Agriculture and Food Systems, vol. 20, pages 1-10.
    16. Jordaan, Henry & Grove, Bennie, 2007. "Factors Affecting Maize Producers Adoption of Forward Pricing in Price Risk Management: The Case of Vaalharts," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 46(4), pages 1-18, December.
    17. Pennings, Joost M.E. & Garcia, Philip & Irwin, Scott H. & Good, Darrel L., 2003. "How To Group Market Participants? Heterogeneity In Hedging Behavior," 2003 Annual meeting, July 27-30, Montreal, Canada 21963, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    18. Jordaan, Henry & Grove, Bennie, 2008. "Factors affecting the use of forward pricing methods in price risk management with special reference to the influence of risk aversion," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 47(1), pages 1-14, March.
    19. Elisabeth Vollmer & Daniel Hermann & Oliver Musshoff, 2019. "The disposition effect in farmers’ selling behavior: an experimental investigation," Agricultural Economics, International Association of Agricultural Economists, vol. 50(2), pages 177-189, March.
    20. Ueckermann, E.M. & Blignaut, J.N. & Gupta, Rangan & Raubenheimer, J., 2008. "Modelling South African grain farmers’ preferences to adopt derivative contracts using discrete choice models," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 47(2), pages 1-18, June.

    More about this item

    Keywords

    Marketing; Risk and Uncertainty;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:aaea12:124471. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/aaeaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.