Non-Optimal Behavior and Estimation of Risk Preferences

Zhengfei Guan and Feng Wu

No 170636, 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota from Agricultural and Applied Economics Association

Abstract: Non-optimal behavior due to budget constraint or credit availability is commonly observed in agricultural production. Not accounting for non-optimal behavior would result in biased estimates of risk preferences. A generalized model is developed in this article for estimating agents’ risk attitude accommodating both optimal and non-optimal behaviors. Results from Monte Carlo simulations suggest that estimation based on the proposed model yields consistent and unbiased risk preference estimates, whereas estimation based on the conventional modeling procedure produces biased results.

Keywords: Agricultural Finance; Production Economics; Risk and Uncertainty (search for similar items in EconPapers)
Pages: 19
Date: 2014-05
New Economics Papers: this item is included in nep-agr, nep-cmp, nep-rmg and nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea14:170636

DOI: 10.22004/ag.econ.170636

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