How laboratory experiments could help disentangle the influences of production risk and risk preferences on input decisions
Douadia Bougherara and
No 18-903, TSE Working Papers from Toulouse School of Economics (TSE)
The purpose of this article is to further our understanding of input choices (such as pesticides or fertilisers) when producers face production risk that depends on a random shock and on the quantity of input used. Using laboratory experiments, we study the role of risk preferences and public policies (here, a lump-sum subsidy and insurance) on producers’ input decisions in two situations: i) a risk-decreasing input; and ii) a risk-increasing input. Our findings raise questions on the sensitivity of optimal input choices to risk preferences and the relevance of the expected utility model to describe farmers’ decisions.
Keywords: laboratory experiment; input choice; production risk; risk preferences; subsidy; insurance (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-ias, nep-rmg and nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:32566
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