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The Effect Of An Additional Alternative On Measured Risk Preferences In A Laboratory Experiment In Peru

  • Jim Engle-Warnick

    ()

  • Javier Escobal

    ()

  • Sonia Laszlo

    ()

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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Paper provided by McGill University, Department of Economics in its series Departmental Working Papers with number 2006-10.

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Length: 36 pages
Date of creation: Sep 2006
Date of revision:
Handle: RePEc:mcl:mclwop:2006-10
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  15. Chris Starmer, 1999. "Cycling with Rules of Thumb: An Experimental Test for a new form of Non-Transitive Behaviour," Theory and Decision, Springer, vol. 46(2), pages 139-157, April.
  16. Sachiko Miyata, 2003. "Household's risk attitudes in Indonesian villages," Applied Economics, Taylor & Francis Journals, vol. 35(5), pages 573-583.
  17. David Buschena & David Zilberman, 1999. "Testing the Effects of Similarity on Risky Choice: Implications for Violations of Expected Utility," Theory and Decision, Springer, vol. 46(3), pages 253-280, June.
  18. Feder, Gershon & Just, Richard E & Zilberman, David, 1985. "Adoption of Agricultural Innovations in Developing Countries: A Survey," Economic Development and Cultural Change, University of Chicago Press, vol. 33(2), pages 255-98, January.
  19. Birnbaum, Michael H. & Patton, Jamie N. & Lott, Melissa K., 1999. "Evidence against Rank-Dependent Utility Theories: Tests of Cumulative Independence, Interval Independence, Stochastic Dominance, and Transitivity, , , ," Organizational Behavior and Human Decision Processes, Elsevier, vol. 77(1), pages 44-83, January.
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