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

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  • Arnaud Reynaud

    (INRA, University of Toulouse Capitole
    University of Economics and Law Ho Chi Minh City and Vietnam Center of Research in Economics, Management and Environment (VCREME))

  • Cécile Aubert

    (University of Bordeaux, GREThA, and Toulouse School of Economics)

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.

Suggested Citation

  • Arnaud Reynaud & Cécile Aubert, 2020. "Does flood experience modify risk preferences? Evidence from an artefactual field experiment in Vietnam," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 45(1), pages 36-74, March.
    • Handle: RePEc:pal:genrir:v:45:y:2020:i:1:d:10.1057_s10713-019-00044-w
    DOI: 10.1057/s10713-019-00044-w
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