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Investigating inconsistencies in complex lotteries: The role of cognitive skills of low-numeracy subjects

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  • Bruns, Selina
  • Hermann, Daniel
  • Musshoff, Oliver

Abstract

Comprehension in risk elicitation tasks is crucial, as otherwise the results are rather noisy than reliable. One prominent risk-elicitation tool, the Holt and Laury task (HL-task), is particularly prone to a noisy outcome - indicated by high inconsistency levels - when used among low-literacy subjects. Yet, it is unclear what drives inconsistencies. In this note we investigate the HL-task inconsistency levels of 247 smallholder farmers from rural Cambodia. Cognitive skills, measured through Raven’s Progressive Matrices (RPM), are a statistically significant determinant of inconsistency levels. A second step in the analysis reveals that cognitive skills are a statistically significant explanation for inconsistency levels for men, but not for women. Our results suggest that researchers should conduct a comprehensive pre-test when aiming at using abstract risk-elicitation methods among low-numeracy subjects in the field.
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Suggested Citation

  • Bruns, Selina & Hermann, Daniel & Musshoff, Oliver, 2022. "Investigating inconsistencies in complex lotteries: The role of cognitive skills of low-numeracy subjects," 96th Annual Conference, April 4-6, 2022, K U Leuven, Belgium 321195, Agricultural Economics Society - AES.
    • Handle: RePEc:ags:aesc22:321195
    DOI: 10.22004/ag.econ.321195
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