Joint Estimation of Risk Preferences and Technology: Flexible Utility of Futility?

Sergio Horacio Lence

No 9980, 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association)

Abstract: The present study sets up a thought experiment calibrated to represent risks of a high-risk production activity (farming), and investigating whether the structure of risk aversion (i.e., the changes in absolute or relative risk aversion associated with changes in wealth) can be estimated with reasonable precision. Findings strongly suggest that typical production data are unlikely to allow identification of the structure of risk aversion. A flexible utility parameterization is found to worsen technology parameter estimates. Findings also indicate that even under a restricted utility specification, the quality of utility parameters estimated from small samples is very poor.

Keywords: expected utility; risk preferences; production analysis; risk attitudes.; Risk and Uncertainty; C13; D24; D81; Q12. (search for similar items in EconPapers)
Date: 2007

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Related works:
Working Paper: Joint Estimation of Risk Preferences and Technology: Flexible Utility or Futility? (2009)
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