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Violence and Risk Preference: Experimental Evidence from Afghanistan

Michael Callen, Mohammad Isaqzadeh, James D. Long and Charles Sprenger

American Economic Review, 2014, vol. 104, issue 1, 123-48

Abstract: We investigate the relationship between violence and economic risk preferences in Afghanistan combining: (i) a two-part experimental procedure identifying risk preferences, violations of Expected Utility, and specific preferences for certainty; (ii) controlled recollection of fear based on established methods from psychology; and (iii) administrative violence data from precisely geocoded military records. We document a specific preference for certainty in violation of Expected Utility. The preference for certainty, which we term a Certainty Premium, is exacerbated by the combination of violent exposure and controlled fearful recollections. The results have implications for risk taking and are potentially actionable for policymakers and marketers.

JEL-codes: A12 C91 D12 D74 D81 O12 O17 (search for similar items in EconPapers)
Date: 2014
Note: DOI: 10.1257/aer.104.1.123
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