Safety-first? A context-rich experimental study of the role of safety-first risk preferences in a post-harvest grain marketing setting

BackgroundIt is evident that public health education interventions to promote the use of condoms against HIV infections in Ghana have yielded modest results. However, existing studies in the field of sexual and reproductive health in Ghana have failed to account for differences in risk preferences of individuals. This study fills the gap by investigating how individuals' risk preferences predict their behaviour toward using condoms against HIV in Ghana.MethodConceptually, the study followed the Grossman health capital theoretical model for risk preference and health behaviour nexus. Data were obtained from the most recent Ghana Living Standards Survey Round 7 (GLSS 7), conducted in 2017. Using data from GLSS 7, a probit regression model was estimated to show how the risk preferences of individuals that did not abstain from sex predicted their use of condoms against HIV. To ensure robustness, two scenarios of declared risk preferences were used to predict the use of condom behaviour against HIV.ResultsProbit regression estimation shows that the risk preferences of individuals that did not abstain from sex significantly predicted their use of condoms against HIV in Ghana. Even though the study found that the predicted probability of using a condom reduces among risk-averse individuals that do not abstain from sex, not using a condom against HIV was found to be worse among risk lovers.ConclusionThe study provides empirical evidence that public health education against HIV/AIDS in Ghana cannot continue to ignore the risk preference of individuals. The results of this study have immediate implications, first for a comprehensive and continuous measurement of risk preferences among Ghanaians in major household surveys going forward. At the moment, the latest round of the GLSS is just about the only household survey in Ghana that has attempted to collect some data on individual time and risk preferences using only hypothetical monetary rewards. Second is the immediate consideration of individual risk preferences in public health education campaigns against HIV/AIDS in Ghana.

It is ultimately an empirical question whether risk preferences are stable over time. The evidence comes from diverse strands of literature, covering the stability of risk preferences in panel data over shorter periods of time, life-cycle dynamics in risk preferences, the possibly long-lasting effects of exogenous shocks on risk preferences as well as temporary variations in risk preferences. Individual risk preferences appear to be persistent and moderately stable over time, but their degree of stability is too low to be reconciled with the assumption of perfect stability in neoclassical economic theory. We offer an alternative conceptual framework for preference stability that builds on research regarding the stability of personality traits in psychology. The definition of stability used in psychology implies high levels of rank-order stability across individuals and not that the individual will maintain the same level of a trait over time. Preference parameters are considered as distributions with a mean that is significantly but less than perfectly stable, plus some systematic variance. This framework accommodates evidence on systematic changes in risk preferences over the life cycle, due to exogenous shocks such as economic crises or natural catastrophes, and due to temporary changes in self-control resources, emotions, or stress. We note that research on the stability of (risk) preferences is conceptually at the heart of microeconomics and systematic changes in risk preferences have vital real-world consequences.

PurposeUrbanization is a main driver of the transformation from agricultural-based economies to service-based economies. At the same time, urbanization might also alter preferences and attitudes such as risk and time preferences that contribute to economic growth and foster this transition. To study the effect of urbanization, few studies have compared individual time or risk preferences in rural and urban settings, reporting mixed results. This study analyses how risk and time preferences alter along the rural–urban interface and assesses the correlation of socio-economic, socio-cultural and demographic characteristics with these preferences. Using such an approach provides insights how preferences are altered in areas of transition as the rural–urban interface mirrors different stages of urbanization.Design/methodology/approachUsing experimental approaches, risk attitudes and time preferences of 1,117 agricultural and non-agricultural households were elicited along the rural–urban interface of the fast-developing Indian megacity Bengaluru in 2016/17. The study reports joint estimations of risk and time preferences and discusses the influence of urbanization on these preferences.FindingsResults show that households are on average slightly risk-averse and highly impatient. The results also indicate a decline in discount rates towards rural areas while risk preferences do not considerably differ between those areas. This puzzling result may be explained by difference response of rural and urban areas to the Demonetization policy of the Indian government in 2016.Originality/valueThe research design compares jointly estimated risk and time preferences of agricultural and non-agricultural households of a rapidly urbanizing area in a low-medium income country.

There is a growing interest in individual time and risk preferences. Little is known about how these preferences are formed. It is hypothesised that parents may transmit their preferences to their offspring. This paper examines the correlation in offspring and parental time and risk preferences using data from an annual household survey in Australia (the HILDA survey). Both time and risk preferences are examined and we explored whether the correlation in time and risk preferences varies across the distribution of preferences and across the across the four parent–child dyads (mother/daughter, mother/son, father/daughter, father/son). The results show that there is a significant relationship between parents and their young adult offspring risk and time preference measures. The correlation varies across the distribution of time preferences. The correlation was largest for longer planning horizons. Risk averse parents are more likely to have risk averse children. Except for the father/daughter dyad risk seeking parents are more likely to have risk seeking offspring. Some gender differences were found. The association in parental and offspring time preference was larger for mothers than fathers. Daughters are more likely to be influenced by their mother’s risk preferences, however, sons are equally influenced by both parents. The results of this study suggest that the transmission in preferences is more nuanced than previously thought and parental gender may be important.

Based on the method of experimental economics, this paper tests the effect of budget constraint strength on investor risk preference by 4 static experiments and 4 dynamic experiments. The results indicated that the soft budget constraint improved the degree of investors' risk preference. With the increase of budget constraint intensity, the ratio of risk avoidance is reduced. On the other hand, duration of operation reduces the subjects' risk preference. In decision-making, the subjects show adventure in extremely high or low assets and relative risk aversion in the medium assets. The previous income also affects subjects' current investment choices. When previous income is positive, the subjects' risk attitude tends to drift toward the risk preference. Male are more adventurous than female in investment options, but this gender difference isn't significant in moderate soft budget constraint. The soft budget constraint actually increased the duration of operation. Effect of mental account will increase the risk propensity of subjects.

In the context of advancing the transformation and upgrading of grassland animal husbandry, encouraging and guiding the widespread adoption of livestock insurance plays an important role in promoting the sustainable development of the livestock industry. This paper explores the impact of herders’ attitudes and perceptions towards climate change risks on their livestock insurance strategies. Firstly, experimental economics methods are employed to measure the risk preferences of herders on the Tibetan Plateau. Secondly, a theoretical model incorporating risk preferences and insurance adoption behavior is constructed. Finally, the effects of herders’ risk preferences on insurance adoption behavior are empirically examined through double-hurdle models, instrumental variable models, and moderating effect models. The results reveal that (1) most herders on the Tibetan Plateau exhibit risk-averse characteristics. (2) The degree of risk preference has a significant negative impact on herders’ insurance adoption behavior, while the risk perception significantly positively influences insurance adoption. The results remain valid even after addressing issues of endogeneity and conducting robustness checks. (3) Livestock income plays a crucial moderating role in the mechanism through which risk attitudes affect insurance adoption behavior. (4) The impact of risk preference on insurance adoption behavior shows regional and income heterogeneity.

Two experiments investigate the impact of the evaluative connotation of risk terms on the judgment of risk behaviour and on risk preference. In the first experiment we focus on (1) the evaluation congruence of the risk terms with a general risk norm and (2) with subjects' individual risk preference, and its effects on the extremity of judgments of risk behaviour. In the second experiment we address (3) the effects of evaluative connotation of risk terms on risk preference.In the first experiment subjects were presented with four decision problems, each with a risky and a cautious decision option, and were required to judge options. Results showed that the judged discrepancy between the risky and cautious option was larger on scales which were evaluatively congruent with the general risk norm for that specific decision problem or with subjects' individual preference. More specificly, in decision problems for which there was considerable consensus about the risk‐norm judgments were more extreme on scales which were congruent with the risk norm, in those problems lacking a clear‐cut risk‐norm judgments were more extreme on scales congruent with subjects' individual risk preference.In the second experiment we studied the reverse relation between the evaluative connotation of risk terms and risk preference. This experiment demonstrates that using evaluatively biased risk terms can affect risk preference. Using terms which imply a positive evaluation of risk‐taking and a negative evaluation of risk avoidance led to increased risk preference, and vice versa. Results are discussed in the context of accentuation theory.

People choose differently when facing potential gains than when facing potential losses. Clear gross differences in decision making between gains and losses have been empirically demonstrated in numerous studies (e.g., framing effect, risk preference, loss aversion). However, theories maintain that there are strong underlying connections (e.g., reflection effect). We investigated the relationship between gains and losses decision making, examining risk preferences, and choice strategies (the reliance on option information) using a monetary gamble task with interleaved trials. For risk preferences, participants were on average risk averse in the gains domain and risk neutral/seeking in the losses domain. We specifically tested for a theoretically hypothesized correlation between individual risk preferences across the gains and losses domains (the reflection effect), but found no significant relationship in the predicted direction. Interestingly, despite the lack of reflected risk preferences, cross-domain risk preferences were still informative of individual choice behavior. For choice strategies, in both domains participants relied more heavily on the maximizing strategy than the satisficing strategy, with increased reliance on the maximizing strategy in the losses domain. Additionally, while there is no mathematical reliance between the risk preference and strategy metrics, within both domains there were significant relationships between risk preferences and strategies—the more participants relied upon the maximizing strategy the more risk neutral they were (equating value and utility maximization). These results demonstrate the complexity of gains and losses decision making, indicating the apparent contradiction that their underlying cognitive/neural processes are both dissociable and overlapping.

SINCE ITS INTRODUCTION, the expected utility hypothesis has been widely used in the construction of economic models. More recently, attention has focused on the conditions under which it is possible in principle to recover individual investors' risk preferences from their demand for assets (Dybvig and Polemarchakis [2]). This paper represents a first attempt to recover preferences operationally from data on the actual demand for assets. Numerous difficulties are encountered in attempting to measure preferences toward risk in a real world setting. Preferences are revealed through the choices of an individual. But in an uncertain world, these choices also depend on his expectations of future events. Hence, an immediate problem arises in separating the influences of each on such decisions. Problems can also arise in measuring other variables, such as wealth, which influence choices. Because of these difficulties, efforts to classify and measure an individual's risk preferences have been confined to direct assessments in hypothetical environments (e.g. Kahneman and Tversky [4] and Keeney and Raiffa [5, pp. 203-212]).2 In these studies the authors assumed that stated preferences are accurate indicators of actual behavior. The question remains, however, whether individuals actually behave in the way their assessments predict. The purpose of this note is to make some progress in answering this question. In it an experiment is described which infers an individual's risk preferences from his actual choices in a real world environment. Specifically, the risk aversion of a dealer in U.S. Government securities is assessed directly and then estimated statistically from his actual demand for bills in the weekly Treasury auctions. The distribution of returns used in the analysis are calculated from the forecasts made by the dealer himself. In addition to introducing new procedures for measuring preferences, this study provides insights into the reliability of direct assessments in predicting the actual behavior.

We investigate the source of risk premiums: individual risk preferences. By examining the wealth characteristics of agents of different risk preferences, we study the financial incentive of investors to demonstrate different risk preferences. To accomplish this, we model the stock market utilizing artificial adaptive agents. If investors have incentive to vary their risk preferences, or if investors of a constant risk preference vary the way they participate in the market under different market conditions, this could lead to time variation in market risk premiums. We find that agents have significant incentive to demonstrate different risk preferences under different market conditions.(JEl G12)

Uncovering the neural basis of risk preferences in cooperative Dyads: A fNIRS study.

Air pollution and individual risk preference: Evidence from China

This paper uses Agent-based modeling and simulation to study collective violent events from the perspective of individual's risk perception, by abstracting individual's risk preference, emotion factor, risk level and other factors we analyze and explore the influence of each factors to collective violent events. Considerable simulations indicate that, individual's density risk preference determines assemble morphology of the crowd and the event-relevance and emotion factor together determine the trend of events, while police's timely and effective intervention could prevent the spreading of the events. These conclusions provide meaningful theoretical basis for relevant organs.

PurposeWith a growing world population and climate crises, edible insects are a promising alternative to conventional livestock. However, Western consumers are largely opposed to eating insects. The aim of this study is to investigate the acceptance of insects in a German sample with a specific focus on risk–benefit perceptions and risk preferences.Design/methodology/approachData were collected via an online survey (N = 569). Established scales for food neophobia (FN), risk perception, risk preference and acceptance were used. The statistical analyses included mean comparisons regarding acceptance and risk–benefit perceptions of unprocessed and processed insects. We further examined the role of perceived benefits and risks as well as risk preferences as determinants of acceptance via hierarchical multiple regressions.FindingsRespondents indicated lower perceived risks, and higher perceived benefits and thus higher acceptance for processed insect products as compared to whole insects. Risk perception was the strongest predictor of acceptance of unprocessed as well as processed insect food. Respondents who reported to have already eaten insects before exhibited higher risk preferences than those who had not.Originality/valueThis study specifically considered the role of risk preferences, which has been so far largely overlooked in consumer research on insect foods. The findings indicate that acceptance of insect food is mainly driven by risk perception rather than individual risk preferences. However, risk preferences should not be totally overlooked as they seem to play a role especially for unprocessed insects and the decision to try insects for the first time.

A key component of economic decisions is the integration of information about reward outcomes and probabilities in selecting between competing options. In many species, risky choice is influenced by the magnitude of available outcomes, probability of success and the possibility of extreme outcomes. Chimpanzees are generally regarded to be risk-seeking. In this study, we examined two aspects of chimpanzees' risk preferences: first, whether setting the value of the non-preferred outcome of a risky option to zero changes chimpanzees’ risk preferences, and second, whether individual risk preferences are stable across two different measures. Across two experiments, we found chimpanzees (Pan troglodytes, n = 23) as a group to be risk-neutral to risk-avoidant with highly stable individual risk preferences. We discuss how the possibility of going empty-handed might reduce chimpanzees' risk-seeking relative to previous studies. This malleability in risk preferences as a function of experimental parameters and individual differences raises interesting questions about whether it is appropriate or helpful to categorize a species as a whole as risk-seeking or risk-avoidant.This article is part of the theme issue ‘Existence and prevalence of economic behaviours among non-human primates’.