The effects of risk and ambiguity aversion on technology adoption: Evidence from aquaculture in Ghana

Abstract

Abstract Small-scale farmers in developing countries frequently make production decisions in situations of uncertainty. There is growing evidence that ambiguity - and not just risk - affects farming decisions, limiting the adoption of new farming practices and technologies. We study the adoption of three new technologies, designed to be risk-reducing, among smallholder aquafarmers in Ghana. We conduct a set of field experiments designed to elicit farmers’ risk and ambiguity preferences and combine it with survey-based information on their technology adoption decisions. We find, as expected, that aquafarmers who are more risk-averse are quicker to adopt the new technologies but ambiguity aversion has no effect on the adoption of two out of the three technologies (a fast-growing breed of tilapia fish, and extruded feed). Ambiguity-averse farmers are slower to adopt the third technology which entails large fixed costs (floating cages), but its effect is diminishing in the number of prior adopters in the village. We argue that the evidence highlights the specific situations in which ambiguity is an impediment to technology adoption: when large fixed costs prevent small-scale experimentation, and there are limited sources of information available to potential adopters.