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

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  • Joost M.E. Pennings
  • Philip Garcia

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.

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  • Joost M.E. Pennings & Philip Garcia, 2001. "Measuring Producers' Risk Preferences: A Global Risk-Attitude Construct," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(4), pages 993-1009.
    • Handle: RePEc:oup:ajagec:v:83:y:2001:i:4:p:993-1009
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    File URL: http://hdl.handle.net/10.1111/0002-9092.00225
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