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Preferences, Uncertainty, and Biases in Land Division: A Bargaining Experiment in the Field

Author

Listed:
  • Margarita Gáfaro

    () (Banco de la República de Colombia)

  • César Mantilla

    ()

Abstract

Divisions of rural land in developing countries reduce the possibilities of farmers to profit from agricultural returns to scale. We design and conduct a framed bargaining experiment to study whether land overvaluation (due to affective reasons) and uncertainty in land values are drivers for land division. In our bargaining game, two players with different agricultural productivity jointly inherit a land plot and individually inherit some tokens they can use to agree on a land allocation. The possible set of land allocations and the spread of land returns vary across treatment arms in the game. We conduct this experiment with 256 participants in eight rural municipalities of the Northeast of Colombia. We find that when players are allowed to divide the land plot, 75% of the bargaining interactions yield the most egalitarian, but less efficient, land allocations. Based on the predictions of a Nash bargaining model and the observations from a sample of 120 college students, we rule out land overvaluation as a driver for land divisions in the context of our game. We also find that uncertainty in land yields reduces the efficiency of land allocations when we do not allow land divisions, by increasing the likelihood of the least productive player keeping the entire land plot. Our results are consistent with a bounded rationality rule in which subjects incorporate a behavioral response to uncertainty by first bargaining over land, which is a certain outcome, and then bargaining over a token transfer. **** RESUMEN: Las divisiones de tierras rurales en los países en desarrollo limitan las posibilidades de los agricultores en estos países de aprovechar economías de escala derivadas de la mecanización. Diseñamos y llevamos a cabo un experimento de negociación para explorar si la sobrevaloración de la tierra (debido a razones afectivas) y la incertidumbre sobre el valor de la tierra explican divisiones ineficientes de tierras en contextos agrícolas. En nuestro juego de negociación, dos jugadores con diferentes niveles de productividad agrícola heredan conjuntamente una parcela de tierra e individualmente heredan algunas fichas que pueden usar para acordar una repartición de la parcela. Variamos aleatoriamente, entre grupos de tratamiento en el juego, el conjunto de posibles reparticiones de la parcela y la dispersión de los retornos de la tierra. Llevamos a cabo este experimento con 256 participantes en ocho municipios rurales del nororiente de Colombia. Encontramos que cuando se permite a los jugadores dividir la parcela, el 75% de las interacciones de negociación generan las asignaciones de tierra más igualitarias, pero menos eficientes. Con base en las predicciones de un modelo de negociación de Nash y las observaciones de una muestra de 120 estudiantes universitarios, descartamos la sobrevaluación de la tierra como motor de divisiones de tierra en el contexto de nuestro juego. Por otro lado, encontramos que una mayor incertidumbre en los rendimientos de la tierra reduce la eficiencia en las asignaciones de tierra cuando eliminamos las divisiones igualitarias del conjunto de posibles reparticiones. Nuestros resultados son consistentes con una regla de racionalidad limitada en la cual los sujetos incorporan una respuesta conductual a la incertidumbre, al negociar primero sobre una asignacin de tierra, que es un resultado fijo y determinado, y luego negociar sobre una transferencia de fichas.

Suggested Citation

  • Margarita Gáfaro & César Mantilla, 2019. "Preferences, Uncertainty, and Biases in Land Division: A Bargaining Experiment in the Field," Borradores de Economia 1092, Banco de la Republica de Colombia.
  • Handle: RePEc:bdr:borrec:1092
    DOI: 10.32468/be.1092
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    More about this item

    Keywords

    Land division; Nash bargaining; affective value of land; nonuse value; División de tierras; negociación de Nash; valor afectivo; valor de no uso;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment

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