IDEAS home Printed from
   My bibliography  Save this paper

Risky Choices of Poor People: Comparing Risk Preference Elicitation Approaches in Field Experiments


  • Holden , Stein

    () (Centre for Land Tenure Studies, Norwegian University of Life Sciences)


This paper studies the risk preferences of poor rural households in Malawi and compares the Holt and Laury (2002) (HL) multiple price list approach with hypothetical real-world framing and monetary incentive-compatible framing with the Tanaka, Camerer and Nguyen (2010) (TCN) monetary framing approach to elicit prospect theory parameters. The consistency of the results, the role of and potential bias attributable to measurement error, and correlations with socioeconomic characteristics are assessed. The study shows that measurement error can lead to upward bias in risk aversion estimates and over-weighting of low probabilities. The hypothetical real–world HL framing experiments are associated with higher sensitivity to background variation such as exposure to a recent drought shock and distance to markets/poor market access.

Suggested Citation

  • Holden , Stein, 2014. "Risky Choices of Poor People: Comparing Risk Preference Elicitation Approaches in Field Experiments," CLTS Working Papers 10/14, Norwegian University of Life Sciences, Centre for Land Tenure Studies.
  • Handle: RePEc:hhs:nlsclt:2014_010

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Diecidue, Enrico & Wakker, Peter P, 2001. "On the Intuition of Rank-Dependent Utility," Journal of Risk and Uncertainty, Springer, vol. 23(3), pages 281-298, November.
    2. 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.
    3. Yuki Tanaka & Alistair Munro, 2014. "Regional Variation in Risk and Time Preferences: Evidence from a Large-scale Field Experiment in Rural Uganda," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 23(1), pages 151-187.
    4. Tversky, Amos & Kahneman, Daniel, 1992. "Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
    5. Binswanger, Hans P, 1981. "Attitudes toward Risk: Theoretical Implications of an Experiment in Rural India," Economic Journal, Royal Economic Society, vol. 91(364), pages 867-890, December.
    6. Lionel Page & David Savage & Benno Torgler, 2012. "Variation in Risk Seeking Behavior in a Natural Experiment on Large Losses Induced by a Natural Disaster," Working Papers 2012.54, Fondazione Eni Enrico Mattei.
    7. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
    8. Tomomi Tanaka & Colin F. Camerer & Quang Nguyen, 2010. "Risk and Time Preferences: Linking Experimental and Household Survey Data from Vietnam," American Economic Review, American Economic Association, vol. 100(1), pages 557-571, March.
    9. Mette Wik & Tewodros Aragie Kebede & Olvar Bergland & Stein Holden, 2004. "On the measurement of risk aversion from experimental data," Applied Economics, Taylor & Francis Journals, vol. 36(21), pages 2443-2451.
    10. Quiggin, John, 1991. "Comparative Statics for Rank-Dependent Expected Utility Theory," Journal of Risk and Uncertainty, Springer, vol. 4(4), pages 339-350, December.
    11. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-291, March.
    12. Drazen Prelec, 1998. "The Probability Weighting Function," Econometrica, Econometric Society, vol. 66(3), pages 497-528, May.
    13. Page, Lionel & Savage, David A. & Torgler, Benno, 2014. "Variation in risk seeking behaviour following large losses: A natural experiment," European Economic Review, Elsevier, vol. 71(C), pages 121-131.
    14. Steven J. Humphrey & Arjan Verschoor, 2004. "Decision-making Under Risk among Small Farmers in East Uganda," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 13(1), pages 44-101, March.
    15. Humphrey, Steven J. & Verschoor, Arjan, 2004. "The probability weighting function: experimental evidence from Uganda, India and Ethiopia," Economics Letters, Elsevier, vol. 84(3), pages 419-425, September.
    16. Sarah Jacobson & Ragan Petrie, 2009. "Learning from mistakes: What do inconsistent choices over risk tell us?," Journal of Risk and Uncertainty, Springer, vol. 38(2), pages 143-158, April.
    Full references (including those not matched with items on IDEAS)


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

    Cited by:

    1. Holden , Stein T. & Quiggin, John, 2017. "Probability Weighting and Input Use Intensity in a State-Contingent Framework," CLTS Working Papers 8/17, Norwegian University of Life Sciences, Centre for Land Tenure Studies.
    2. Holden , Stein T. & Quiggin, John, 2015. "Climate risk and state-contingent technology adoption: The role of risk preferences and probability weighting," Working Paper Series 15-2015, Norwegian University of Life Sciences, School of Economics and Business.
    3. Holden , Stein & Fischer, Monica, 2015. "Can Adoption of Improved Maize Varieties Help Smallholder Farmers Adapt to Drought? Evidence from Malawi," CLTS Working Papers 1/15, Norwegian University of Life Sciences, Centre for Land Tenure Studies.
    4. Stein Holden & Monica Fisher, 2015. "Subsidies promote use of drought tolerant maize varieties despite variable yield performance under smallholder environments in Malawi," Food Security: The Science, Sociology and Economics of Food Production and Access to Food, Springer;The International Society for Plant Pathology, vol. 7(6), pages 1225-1238, December.
    5. repec:oup:erevae:v:44:y:2017:i:2:p:285-308. is not listed on IDEAS
    6. Holden, Stein T., 2015. "Risk Preferences, Shocks and Technology Adoption: Farmers’ Responses to Drought Risk," CLTS Working Papers 3/15, Norwegian University of Life Sciences, Centre for Land Tenure Studies.

    More about this item


    expected utility theory; prospect theory; risk preferences; loss aversion; probability weighting; field experiment; multiple price lists; measurement error; Malawi;

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    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:hhs:nlsclt:2014_010. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kateryna Krutskykh). General contact details of provider: .

    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 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.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.