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Does flood experience modify risk preferences? Evidence from an artefactual field experiment in Vietnam

Arnaud Reynaud and Cécile Aubert ()
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Arnaud Reynaud: TSE-R - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - Université Fédérale Toulouse Midi-Pyrénées - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: We conducted an artefactual field experiment in Vietnam to investigate whether and how experiencing a natural disaster affects individual attitudes toward risks. Using experimental and real household data, we show that households in villages affected by a flood in recent years exhibit more risk aversion, compared with individuals living in similar but unaffected villages. Interestingly, this result holds for the loss domain, but not the gain domain. In line with Prospect Theory, Vietnamese households distort probabilities. The distortion is related to aid received and social networks participation, but is unrelated to flood experience.

Keywords: Risk preferences; Non-expected utility; Flood; Vietnam; Field experiment (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-sea, nep-tra and nep-upt
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Published in Geneva Risk and Insurance Review, Palgrave Macmillan, 2020, 45 (1), pp.36-74. ⟨10.1057/s10713-019-00044-w⟩

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DOI: 10.1057/s10713-019-00044-w

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