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The role of risk in shaping production decisions: an empirical analysis

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  • Ruth Vargas Hill

Abstract

This paper uses data on risk preferences and perceptions of risk collected through hypothetical questions in combination with more traditional measures of a households` ability to deal with risk to identify the impact of risk on production decisions. Contextualized hypothetical questions on risk preferences and risk perceptions were collected along with standard socioeconomic survey for 300 coffee-farming households in Uganda. This data is used here to show both that data collected from hypothetical questions can be usefully utilised to understand a household`s behaviour under risk in real settings, and that risk has a significant impact on the production decisions of poor coffee farmers in Uganda.

Suggested Citation

  • Ruth Vargas Hill, 2006. "The role of risk in shaping production decisions: an empirical analysis," Economics Series Working Papers GPRG-WPS-049, University of Oxford, Department of Economics.
    • Handle: RePEc:oxf:wpaper:gprg-wps-049
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    References listed on IDEAS

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    1. Hans P. Binswanger, 1980. "Attitudes Toward Risk: Experimental Measurement in Rural India," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 62(3), pages 395-407.
    2. Camerer, Colin F & Hogarth, Robin M, 1999. "The Effects of Financial Incentives in Experiments: A Review and Capital-Labor-Production Framework," Journal of Risk and Uncertainty, Springer, vol. 19(1-3), pages 7-42, December.
    3. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    4. Grether, David M & Plott, Charles R, 1979. "Economic Theory of Choice and the Preference Reversal Phenomenon," American Economic Review, American Economic Association, vol. 69(4), pages 623-638, September.
    5. Camerer, Colin F, 1989. "An Experimental Test of Several Generalized Utility Theories," Journal of Risk and Uncertainty, Springer, vol. 2(1), pages 61-104, April.
    6. Battalio, Raymond C & Kagel, John H & Jiranyakul, Komain, 1990. "Testing between Alternative Models of Choice under Uncertainty: Some Initial Results," Journal of Risk and Uncertainty, Springer, vol. 3(1), pages 25-50, March.
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    Cited by:

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    2. Adeline Delavande & Hans-Peter Kohler, 2009. "Subjective expectations in the context of HIV/AIDS in Malawi," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 20(31), pages 817-875.

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