Decision-making under risk among small farmers in east Uganda

Humphrey, Steven J. and Verschoor, Arjan (2004) Decision-making under risk among small farmers in east Uganda. Journal of African Economies, 13 (1). pp. 44-101. ISSN 0963-8024

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Abstract

We report an experimental test of individual decision-making behaviour under risk conducted in rural east Uganda. The test employs an incentive compatible design where subjects were paid according to the outcome of one of their choices. We find that the risk preferences of east Ugandan farmers exhibit systematic and predictable deviations from expected utility maximisation. These include violations of the independence and transitivity axioms of expected utility theory, and reference-dependent preferences. Not all deviations are the same as those which emerge from tests using (generally) student subjects at First World universities (e.g., we observe an S-shaped rather than an inverse S-shaped probability weighting function). We also find evidence of a substantial stochastic component to behaviour. The implications of our findings in terms of the appropriate characterisation of risk preferences in applied policy analyses are discussed.

Item Type:	Article
Faculty \ School:	Faculty of Social Sciences Faculty of Social Sciences > School of Global Development (formerly School of International Development)
UEA Research Groups:	Faculty of Social Sciences > Research Groups > Impact Evaluation Faculty of Social Sciences > Research Groups > Gender and Development University of East Anglia Schools > Faculty of Science > Tyndall Centre for Climate Change Research Faculty of Science > Research Centres > Tyndall Centre for Climate Change Research Faculty of Social Sciences > Research Centres > Centre for Behavioural and Experimental Social Sciences
Depositing User:	Vishal Gautam
Date Deposited:	01 Mar 2004
Last Modified:	20 Jun 2023 14:42
URI:	https://ueaeprints.uea.ac.uk/id/eprint/16597
DOI:	10.1093/jae/13.1.44

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