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The Effect of an Additional Alternative on Measured Risk Preferences in a Laboratory Experiment in Peru

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  • Jim Engle-Warnick
  • Javier Escobal
  • Sonia Laszlo

Abstract

We experimentally test for the effect of an additional alternative on the measured risk preferences of farmers in rural Peru. In our experiment, subjects revealed their risk was always dominated by one of the two existing gambles. We found that subjects chose this gamble nearly one quarter of the time, in some cases causing the subjects to appear to be more risk loving. We found that subjects in a traditional laboratory environment did not choose the dominated gamble, but their choices were affected by its presence.
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  • Jim Engle-Warnick & Javier Escobal & Sonia Laszlo, 2006. "The Effect of an Additional Alternative on Measured Risk Preferences in a Laboratory Experiment in Peru," CIRANO Working Papers 2006s-06, CIRANO.
    • Handle: RePEc:cir:cirwor:2006s-06
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    Cited by:

    1. Machado, Fabiana, 2011. "Inequality, Uncertainty, and Redistribution," MPRA Paper 35665, University Library of Munich, Germany.

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    More about this item

    Keywords

    rural development; technology choice; risk preferences; risk measurement instruments; experimental economics; choix de la technologie; développement rural; économie expérimentale; instruments de mesure du risque; préférences à l'égard du risque;
    All these keywords.

    JEL classification:

    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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