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Specification and estimation of heterogeneous risk preference

Author

Listed:
  • Guan, Zhengfei
  • Wu, Feng

Abstract

In this paper we specify and estimate producers’ risk preference using farm data. We allow heterogeneous risk preference across individuals and propose a specification to model the heterogeneity. We base farmers’ decision making on a utility maximization framework and incorporate both market and production risk in farmers’ decision making. We do not assume any specific utility function or distribution of risk. The empirical application to farm level production data shows that risk preference does vary among individuals; demographic and institutional factors have significant effect on producers’ risk attitude.

Suggested Citation

  • Guan, Zhengfei & Wu, Feng, 2009. "Specification and estimation of heterogeneous risk preference," 2009 Conference, August 16-22, 2009, Beijing, China 51804, International Association of Agricultural Economists.
  • Handle: RePEc:ags:iaae09:51804
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    File URL: http://purl.umn.edu/51804
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