Measuring Producers' Risk Preferences: A Global Risk-Attitude Construct

Joost Pennings () and Philip Garcia

American Journal of Agricultural Economics, 2001, vol. 83, issue 4, 993-1009

Abstract: In applied agricultural economic research various risk-attitude elicitation techniques are used. Here, we investigate whether risk-attitude measures rooted in the expected utility framework are related to measures rooted in the multi-item scale framework. Using a second-order factor analytical model, and data obtained from personal computer-guided interviews with 373 farmers, we investigate whether the common variance among the (latent) risk-attitude measures can be accounted for by a global risk-attitude construct. We find that the different risk-attitude measures are related, and that the global risk-attitude construct is significantly related to farmers' intention to use futures contracts. Our research suggests that farmers' risk attitude is a higher-order characteristic that cannot be effectively extracted by a single measure. Copyright 2001, Oxford University Press.

Date: 2001
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