Anomaly in Decision Making Under Risk:Violation of Stochastic Dominance Among Farmers in Gujarat, India

Thiagu Ranganathan, Sarthak Gaurav and Ashish Singh ()
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Ashish Singh: Institute of Economic Growth, Delhi

No 343, IEG Working Papers from Institute of Economic Growth

Abstract: Our study investigates farmers' decision making under risk by eliciting their willingness to pay (WTP) for hypothetical risky income distributions. To inquire whether farmers behave differently when gambles are framed as yield risk or price risk, we present these income distributions as those with constant price and variable yield to a set of farmers and those with constant yield and variable price to another set of farmers. We find that a significant number of farmers violate stochastic dominance, an assumption central to the validity of rational decision making. We also inquire whether such behaviour is related to their self-reported risk attitudes. We find that farmers who perceive themselves as risk takers are more likely to violate stochastic dominance than those who perceive themselves as risk avoiders. We explore reasons for such behaviour and posit conditions under which configural weight theories of decision making could explain such behaviour.

Keywords: Decisions under risk; experiments; stochastic dominance; India (search for similar items in EconPapers)
JEL-codes: D01 D03 D81 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2014
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Published as Institute of Economic Growth, Delhi, 2014, pages 1-31

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Persistent link: https://EconPapers.repec.org/RePEc:awe:wpaper:343

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