IDEAS home Printed from https://ideas.repec.org/p/ags/cudawp/14762.html
   My bibliography  Save this paper

Bayesian Herders: Asymmetric Updating Of Rainfall Beliefs In Response To External Forecasts

Author

Listed:
  • Lybbert, Travis J.
  • Barrett, Christopher B.
  • McPeak, John G.
  • Luseno, Winnie K.

Abstract

Temporal climate risk weighs heavily on many of the world's poor. Recent advances in model-based climate forecasting have expanded the range, timeliness and accuracy of forecasts available to decision-makers whose welfare depends on stochastic climate outcomes. There has consequently been considerable recent investment in improved climate forecasting for the developing world. Yet, in cultures that have long used indigenous climate forecasting methods, forecasts generated and disseminated by outsiders using unfamiliar methods may not readily gain the acceptance necessary to induce behavioral change. The value of model-based climate forecasts depends critically on the premise that forecast recipients actually use external forecast information to update their rainfall expectations. We test this premise using unique survey data from pastoralists and agropastoralists in southern Ethiopia and northern Kenya, specifying and estimating a model of herders updating seasonal rainfall beliefs. We find that those who receive and believe model-based seasonal climate forecasts indeed update their priors in the direction of the forecast received, assimilating optimistic forecasts more readily than pessimistic forecasts.

Suggested Citation

  • Lybbert, Travis J. & Barrett, Christopher B. & McPeak, John G. & Luseno, Winnie K., 2003. "Bayesian Herders: Asymmetric Updating Of Rainfall Beliefs In Response To External Forecasts," Working Papers 14762, Cornell University, Department of Applied Economics and Management.
  • Handle: RePEc:ags:cudawp:14762
    DOI: 10.22004/ag.econ.14762
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/14762/files/wp030017.pdf
    Download Restriction: no

    File URL: https://libkey.io/10.22004/ag.econ.14762?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. David Hirshleifer & Tyler Shumway, 2003. "Good Day Sunshine: Stock Returns and the Weather," Journal of Finance, American Finance Association, vol. 58(3), pages 1009-1032, June.
    2. Rosenzweig, Mark R & Binswanger, Hans P, 1993. "Wealth, Weather Risk and the Composition and Profitability of Agricultural Investments," Economic Journal, Royal Economic Society, vol. 103(416), pages 56-78, January.
    3. Barrett, Christopher B., 2002. "Food security and food assistance programs," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 2, chapter 40, pages 2103-2190, Elsevier.
    4. Roll, Richard, 1984. "Orange Juice and Weather," American Economic Review, American Economic Association, vol. 74(5), pages 861-880, December.
    5. Keren, Gideon, 1987. "Facing uncertainty in the game of bridge: A calibration study," Organizational Behavior and Human Decision Processes, Elsevier, vol. 39(1), pages 98-114, February.
    6. Matthew Rabin & Joel L. Schrag, 1999. "First Impressions Matter: A Model of Confirmatory Bias," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(1), pages 37-82.
    7. Matthew Rabin, 1998. "Psychology and Economics," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 11-46, March.
    8. C. Barrett & K. Smith & P. Box, 2001. "Not Necessarily In The Same Boat: Heterogeneous Risk Assessment Among East African Pastoralists," Journal of Development Studies, Taylor & Francis Journals, vol. 37(5), pages 1-30.
    9. Camerer, Colin & Loewenstein, George & Weber, Martin, 1989. "The Curse of Knowledge in Economic Settings: An Experimental Analysis," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1232-1254, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bellemare, Marc F. & Barrett, Christopher B. & Osterloh, Sharon M., 2005. "Household-Level Livestock Marketing Behavior Among Northern Kenyan and Southern Ethiopian Pastoralists," Working Papers 14749, Cornell University, Department of Applied Economics and Management.
    2. Just, David R. & Roberts, Michael J., 2004. "The Illusion Of Control, Cognitive Dissonance And Farmer Perception Of Gm Crops," 2004 Annual meeting, August 1-4, Denver, CO 19941, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    3. Adeline Delavande & Hans-Peter Kohler, 2009. "Subjective expectations in the context of HIV/AIDS in Malawi," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 20(31), pages 817-875.
    4. McKenzie, David & Gibson, John & Stillman, Steven, 2013. "A land of milk and honey with streets paved with gold: Do emigrants have over-optimistic expectations about incomes abroad?," Journal of Development Economics, Elsevier, vol. 102(C), pages 116-127.
    5. Delavande, Adeline & Giné, Xavier & McKenzie, David, 2011. "Measuring subjective expectations in developing countries: A critical review and new evidence," Journal of Development Economics, Elsevier, vol. 94(2), pages 151-163, March.
    6. Santos, Paulo & Barrett, Christopher B., 2011. "Persistent poverty and informal credit," Journal of Development Economics, Elsevier, vol. 96(2), pages 337-347, November.
    7. Doss, Cheryl R. & McPeak, John G. & Barrett, Christopher B., 2005. "Perceptions of Risk within Pastoralist Households in Northern Kenya and Southern Ethiopia," 2005 Annual meeting, July 24-27, Providence, RI 19504, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

    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. Lybbert, Travis J. & Barrett, Christopher B. & McPeak, John G. & Luseno, Winnie K., 2007. "Bayesian Herders: Updating of Rainfall Beliefs in Response to External Forecasts," World Development, Elsevier, vol. 35(3), pages 480-497, March.
    2. David Hirshleifer, 2001. "Investor Psychology and Asset Pricing," Journal of Finance, American Finance Association, vol. 56(4), pages 1533-1597, August.
    3. Doss, Cheryl & McPeak, John & Barrett, Christopher B., 2008. "Interpersonal, Intertemporal and Spatial Variation in Risk Perceptions: Evidence from East Africa," World Development, Elsevier, vol. 36(8), pages 1453-1468, August.
    4. Danz, David, 2020. "Never underestimate your opponent: Hindsight bias causes overplacement and overentry into competition," Games and Economic Behavior, Elsevier, vol. 124(C), pages 588-603.
    5. Doss, Cheryl R. & McPeak, John G. & Barrett, Christopher B., 2005. "Perceptions of Risk within Pastoralist Households in Northern Kenya and Southern Ethiopia," 2005 Annual meeting, July 24-27, Providence, RI 19504, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    6. David Danz & Dorothea Kübler & Lydia Mechtenberg & Julia Schmid, 2015. "On the Failure of Hindsight-Biased Principals to Delegate Optimally," Management Science, INFORMS, vol. 61(8), pages 1938-1958, August.
    7. Christopher B. Barrett & John G. McPeak, 2006. "Poverty Traps and Safety Nets," Economic Studies in Inequality, Social Exclusion, and Well-Being, in: Alain Janvry & Ravi Kanbur (ed.), Poverty, Inequality and Development, chapter 0, pages 131-154, Springer.
    8. Schnellenbach, Jan & Schubert, Christian, 2015. "Behavioral political economy: A survey," European Journal of Political Economy, Elsevier, vol. 40(PB), pages 395-417.
    9. Stefano DellaVigna, 2009. "Psychology and Economics: Evidence from the Field," Journal of Economic Literature, American Economic Association, vol. 47(2), pages 315-372, June.
    10. Schilirò, Daniele & Graziano, Mario, 2011. "Scelte e razionalità nei modelli economici: un'analisi multidisciplinare [Choices and rationality in economic models: a multidisciplinary analysis]," MPRA Paper 31910, University Library of Munich, Germany.
    11. Richard G. Frank, 2004. "Behavioral Economics and Health Economics," NBER Working Papers 10881, National Bureau of Economic Research, Inc.
    12. Keser, Claudia & Markstädter, Andreas, 2014. "Informational asymmetries in laboratory asset markets with state-dependent fundamentals," University of Göttingen Working Papers in Economics 207 [rev.], University of Goettingen, Department of Economics.
    13. Christopher Boyce & Mikolaj Czajkowski & Nick Hanley & Charles Noussair & Michael Townsend & Steve Tucker, 2015. "The effects of emotions on preferences and choices for public goods," Discussion Papers in Environment and Development Economics 2015-08, University of St. Andrews, School of Geography and Sustainable Development.
    14. Bertrand, Jean-Louis & Brusset, Xavier & Fortin, Maxime, 2015. "Assessing and hedging the cost of unseasonal weather: Case of the apparel sector," European Journal of Operational Research, Elsevier, vol. 244(1), pages 261-276.
    15. Berg, Nathan, 2003. "Normative behavioral economics," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 32(4), pages 411-427, September.
    16. Erixon, Lennart, 2001. "Transformation Pressure and Growth - a Missing Link in Macroeconomics," Research Papers in Economics 2001:3, Stockholm University, Department of Economics.
    17. Bruno Biais & Martin Weber, 2009. "Hindsight Bias, Risk Perception, and Investment Performance," Management Science, INFORMS, vol. 55(6), pages 1018-1029, June.
    18. Emmanuel PETIT, 2010. "The role of regret in the persistence of anomalies in financial markets (In French)," Cahiers du GREThA (2007-2019) 2010-07, Groupe de Recherche en Economie Théorique et Appliquée (GREThA).
    19. Oxoby, Robert J., 2007. "The Effect of Incentive Structure on Heuristic Decision Making: The Proportion Heuristic," IZA Discussion Papers 2857, Institute of Labor Economics (IZA).
    20. Lars Lefgren & Brennan Platt & Joseph Price, 2011. "Sticking with What (Barely) Worked," NBER Working Papers 17477, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    ;

    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:cudawp:14762. 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/dacorus.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.