A Comparison of Stated and Revealed Risk Preferences using Safety-First

Sankalp Sharma and Karina Schoengold

No 236126, 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts from Agricultural and Applied Economics Association

Abstract: In this paper we determine the risk preferences of crop producers using the safety-first method. Our methodology is unique, since it utilizes both price and yield risk in the producer’s optimization problem. We then compare the derived preferences with the stated preferences of the producers. The stated preferences are obtained from a lottery-style game designed to elicit producers’ risk preferences. The study is conducted with data from producers in Nebraska, Iowa and South Dakota and the results indicate that there is in fact a relationship between the preferences derived from our structural model and the ones stated by the producers in the game. This is an important result from a policy-making perspective, as it validates the use of behavior elicitation surveys about risk preferences. Such surveys are often easier to administer and less expensive than collecting information on revealed preferences.

Keywords: Crop Production/Industries; Farm Management; Institutional and Behavioral Economics; Production Economics; Risk and Uncertainty (search for similar items in EconPapers)
Pages: 25
Date: 2016
New Economics Papers: this item is included in nep-upt
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea16:236126

DOI: 10.22004/ag.econ.236126

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