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Are peasants risk-averse decision makers?

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  • Joseph Henrich
  • Richard McElreath

Abstract

Evidence shows that real-effort investments can affect bilateral bargaining outcomes. This paper investigates whether similar investments can inhibit equilibrium convergence of experimental markets. In one treatment, sellers' relative effort affects the allocation of production costs, but a random productivity shock ensures that the allocation is not necessarily equitable. In another treatment, sellers' effort increases the buyers' valuation of a good. We find that effort investments have a short-lived impact on trading behavior when sellers' effort benefits buyers, but no effect when effort determines cost allocation. Efficiency rates are high and do not differ across treatments.

Suggested Citation

  • Joseph Henrich & Richard McElreath, 2002. "Are peasants risk-averse decision makers?," Artefactual Field Experiments 00066, The Field Experiments Website.
    • Handle: RePEc:feb:artefa:00066
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    References listed on IDEAS

    as
    1. Hans P. Binswanger, 1980. "Attitudes Toward Risk: Experimental Measurement in Rural India," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 62(3), pages 395-407.
    2. Camerer, Colin & Weber, Martin, 1992. "Recent Developments in Modeling Preferences: Uncertainty and Ambiguity," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 325-370, October.
    3. Gladwin, Christina H, 1979. "Cognitive Strategies and Adoption Decisions: A Case Study of Nonadoption of an Agronomic Recommendation," Economic Development and Cultural Change, University of Chicago Press, vol. 28(1), pages 155-173, October.
    4. Jerome M. Wolgin, 1975. "Resource Allocation and Risk: A Case Study of Smallholder Agriculture in Kenya," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 57(4), pages 622-630.
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