 Hypothetical bias and cognitive ability: Farmers' preference for crop insurance products†Prakashan Chellattan Veettil, Yashodha Yashodha and Joseph Vecci American Journal of Agricultural Economics, 2025, vol. 107, issue 3, 888-924 Abstract: The absence of an incentive‐compatible mechanism to reveal consumers' true willingness to pay in stated preference elicitation methods and the consequent hypothetical bias are an important concern in discrete choice experiments. Our study extends this discourse on hypothetical bias by examining how it varies with the heterogeneity in respondents' cognitive ability and familiarity with a good. This paper also adds to our understanding of the demand for agricultural insurance in developing countries by studying the willingness to pay for one of the world's largest agricultural insurance programs using a large state representative sample. Following a between‐subject design, we implemented a large scale randomized incentivized choice experiment and hypothetical choice experiment with real farmers who make decisions on the purchase of insurance. We find that demand for an insurance product is shaped by the subject's familiarity with and cognitive ability to understand the product. We show that the magnitude of the hypothetical bias is higher at a lower level of cognitive ability and that bias diminishes with an increase in cognitive ability. Finally, we examine key heterogeneity and test a number of possible mechanisms. Date: 2025 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:wly:ajagec:v:107:y:2025:i:3:p:888-924 Access Statistics for this article More articles in American Journal of Agricultural Economics from John Wiley & Sons |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.