Influence Risk Attitudes Research Articles

Risk Behavior of Farmers Cultivating Traditional Rice Varieties in Erode District, Tamil Nadu

This study investigates the risk behavior of traditional rice variety growers in Erode District of Tamil Nadu state, using Moscardi and De Janvry approach and Discriminant analysis technique. A well structured questioner was prepared and purposive random sampling was done in three blocks which covers highest cultivable area under paddy namely Gobichettipalayam, Modakurichi and Bhavani in Erode district. Each traditional rice varieties have some unique characteristics i.e some are pest and disease resistant, drought resistant, resistant to waterlogged condition and have medicinal values. The present study was done to identify the major risks, to quantify the risk attitude and to identify the factors influencing risk attitude of the traditional variety growers in Erode District. In the research it was found that the varieties preferred by farmers were Thuyamalli, Kichadi samba, Karuppukavuni, Mapillai samba,Arcaud Kichadi Samba, Poongar, Thanga Samba, Sivan Samba and few other varieties they were cultivating in small areas using organic farming method.The major risk found in cultivating traditional rice varieties were market risk followed by human labour risk, processing risk, input risk, technology risk, institutional risk, natural risk and other risks include transport risk and storage risk. The farmers were grouped into three categories i.e., risk preferrers (63.33 per cent), risk neutral (28.33 per cent) and risk averse (8.33 per cent) based on risk attitude. Once again the farmers in each group was categorized into low, medium, high risk based on nine factors namely, farmers age, major occupation, years of schooling, family size, membership in any of the farmers association, proportion of paddy area to total farm area, proportion of paddy income to total farm income, experience and adequacy of market which were influencing the risk attitude of farmers. In order to conserve the traditional rice varieties from extinction, to restore the soil health, to ensure nutritional security the farmers were willing to take risk.

Risk attitudes and the big five personality traits: a study on construction project practitioners in Malaysia

Risk management often applies in any decision making process to ensure success of an objective. However, many organizations fail to realize the importance of such knowledge, especially in high risk and complex industries in construction. The decision made while taking uncertainty into account varies among individuals based on their attitudes. Hence, their perspectives towards uncertainty may be the determinant to ensure success in a project. As risk attitudes and perception varies among individuals, so does personality. Henceforth, this study aims to investigate the relationship of the factors in the Big Five theory in influencing risk attitude, by using the Big Five Inventory (BFI) model and the Domain Risk-attitude scale, in order to determine individuals’ personality based on the five dimensions for both categories. The proposed model was tested on 70 decision makers, particularly project practitioners specialize in the construction industry in Malaysia. Partial Least Squared Structural Equation Modelling (PLS-SEM) was used to investigate both variables based on the objectives. The results showed that all variables but one has a significant effect towards risk attitude, where extraversion has the most effect towards risk attitude. All factors of the Big Five except neuroticism reacts positively towards risk attitude. The study of relationship between personality traits and risk taking will signify the vast variations of how every decision maker will choose to respond to uncertainty depending on their respective human behaviour. Such understanding helps in the development of a comprehensive risk management plan.

Over- and under-estimation of risks and counteractive adjustment for cold chain operations

PurposeThis study proposes the use of cumulative prospect theory (CPT) to predict over- and under-estimation of risks and the counteractive adjustment in a cold chain context. In particular, the purpose of this paper is to address the importance of the socio-demographic characteristics of an individual in influencing risk attitude and the analysis of measurable risk probability.Design/methodology/approachThis study uses CPT as the basis to develop a decision analysis model in which the two functions of value editing and probability weighting are nonlinear to adequately determine the flexible risk attitudes of individuals, as well as their prospects with numerous outcomes and different probabilities. An experiment was conducted to obtain empirical predictions, and an efficient Markov Chain Monte Carlo algorithm was applied to overcome the nonlinearity and dimensionality in the process of parameter estimation.FindingsThe respondents overweigh the minor cold chain risks with small probabilities and behave in a risk-averse manner, while underweighting major events with larger ones, thereby leading to risk-seeking behavior. Judgment distortion regarding probability was observed under risk decision with a low probability and a high impact. Moreover, the findings indicate that factors, such as gender, job familiarity and confidentiality significantly influence the risk attitudes and subjective probability weighting of the respondents.Research limitations/implicationsThe findings fit the framework of CPT and extend this theory to deal with human risk attitudes and subjective bias in cold chains. In particular, this study enhances the literature by providing an analysis of cold chain risk from both the human decision-making and managerial perspectives. Moreover, this research determined the importance of the socio-demographic characteristics of an individual to explain the variability in risk attitudes and responses.Practical implicationsManagers must consider the issues of flexible risk attitude and subjective judgment when making choices for risk mitigation strategies. Given the focus on counteractive adjustment for over- and under-estimated risk, firms could evaluate cold chain risk more accurately, and thereby enhance their resilience to risky events while reducing the variability of their performance.Originality/valueThe current study is the first to materialize the phenomena of over- and under-estimation of cold chain risks, as well as to emphasize the different characteristics for loss aversion and judgment distortion at the individual level.

The role of personal interaction in the assessment of risk attitudes

Many decisions under uncertainty are delegated to professionals, such as financial advisors or medical doctors, requiring them to assess the risk attitudes of their clients or patients. To gain a better understanding of the potential factors influencing risk attitude assessments, the current study investigates the role of personal interaction in these assessments. Controlling for information transmitted, we find that personal interaction leads to more risk-averse assessments, but does neither harm nor benefit assessments in terms of precision. We replicate previous findings of stereotypes in risk preference predictions, and discuss the influence of the assessor's own risk attitude on her assessments.

How much do CEOs influence risk attitudes in a firm’s internationalization? Exploring Chinese mining SOES and NSOES

This paper provides an insight into comprehending Chinese firms’ strategic behaviour on risks in outward foreign direct investment (OFDI). Qualitative case studies, based on eight Chinese mining state-owned and non-state-owned enterprises (SOEs and NSOEs). The findings suggest that: (a) the characteristics of CEOs (Chief Executive Officers) of both SOEs and NSOEs significantly influenced the firms’ internationalization risk attitudes; (b) the tenure of CEOs led to SOEs’ periodical and NSOEs’ perennial risk attitudes; (c) CEOs’ personalities and tenure tend to drive the directions of risk attitudes, while CEOs’ experiences and remuneration were linked with risk intensities. These results support the upper echelons theory, suggesting that in understanding different ownership types of Chinese firms’ internationalization risk attitudes, CEOs’ characteristics should be investigated.

When Does Framing Influence Preferences, Risk Perceptions, and Risk Attitudes? The Explicated Valence Account

AbstractWhen faced with an expected loss and a choice between a sure option and a risky option, the gain–loss framing of the problem has been shown to influence option preference. According to prospect theory, this framing effect is the result of contradictory attitudes about risks involving gains and losses. This article develops and tests an alternative explicated valence account (EVA), which proposes that preference reversals are caused by differences in the explicated outcome valences of the options under consideration. EVA can account for previous findings where framing effects are observed, eliminated, or even reversed. In two experiments, EVA successfully predicted when framing effects were observed, eliminated, and reversed. The findings also showed that although framing influenced risk perception, it did not influence risk attitudes. Copyright © 2015 Her Majesty the Queen in Right of Canada Journal of Behavioral Decision Making © 2015 John Wiley & Sons, Ltd.

The Co-Operation between a Private and a Public Company from the Perspective of Desirable Risk Allocation

Implicit and explicit risks implied in contracts are allocated optimally if the risk-taker is always the party who can manage risk at the lowest cost. This principle shall apply even if one of the parties work in the public sector, and the other in the private sector. As risk-attitude of contacting partners is of vital importance in risk-sharing, this paper reviews the key factors influencing risk attitude of governmental organizations and their leaders, government officials elected or appointed for a cycle, and business organizations and their managers. Factors resulting in non-optimized risk allocation are discussed in detail, for example, public sector bureaucrats elected for a cycle focus on outputs of great public interest and tend to discount targets to be realized after the election cycle, and therefore projects more risk appetite than previously assumed. In business organizations principal-agent relationship and lack of entrepreneurial orientation are key factors, whose significance increase in proportion to the size of business and make companies more risk-averse. Short-term contracts, partnership of small-scale businesses, or if there is too much at stake (e.g. a large value bids) for the scale of a company give less space for such distorting factors, and reduce the possibility of risk allocation detrimental to the public sector.

Social Comparison and Risk Taking Behavior

We study theoretically and experimentally decision making under uncertainty in a social environment. We introduce an interdependent preferences model that assumes that the decision maker evaluates monetary outcomes in relation both with his individual and his social reference point. In the experiment we reproduce a workplace environment whereby subjects interact in an effort task, earn (possibly) different wages from this task and then undertake a risky decision that may give them an extra bonus. Controlling for intrinsic risk attitudes, we find that both downward and upward social comparison strongly influence risk attitudes and that they both generate more risk-loving behavior. Moreover, we find that a propension to envy counterposes such effect, by increasing risk aversion.

Economic analysis of risks in fruit and vegetable farming in Osun state, Nigeria

The study analyzed the risks involved in fruit and vegetable farming in Osun state, Nigeria. Specifically, the study examined the risk attitude of farmers, factors influencing risk attitude as well as farmer’s perception on major sources of production and market risks. The study was based on a survey of 150 farmers, comprising 75 predominantly fruit and vegetable farmers, respectively, and covering 12 communities within the six agro-ecological zones in the state. Data were collected using a well structured questionnaire. Descriptive statistics, discriminant analysis and Kruskal–Wallis ranking analysis were used in the study. The study revealed that the average age of the fruit and vegetable respondent was 58.5 and 40.1, respectively, with the male respondents outnumbering the females in each case. The average year of experience was 30.8 and 15.3 for fruit and vegetable respondent, respectively. An average area of (5.36 and 2.21) ha was cultivated by the fruit and vegetable farmers, while orange and okra are the most widely grown fruit and vegetable crops. Damage by pest and disease, traditional methods of farming and weather dependency were the most perceived sources of production risk by the fruit and vegetable farmers. Perishability of produce, low price of produce, poor product handling and packaging as well as exploitation by middlemen were the most perceived sources of market risk. The study also revealed that maintaining good relationship with traders, selling at low prices due to perishability, selling within the locality and non-farm businesses were the major risk management strategies employed by the farmers. Based on the study findings, it is recommended that introduction of a more comprehensive agricultural insurance scheme and introduction of improved technology can ameliorate the effect of risks on fruit and vegetable farmers. Also, public intervention can facilitate better risk management through improved information system. Bangladesh J. Agril. Res. 37(3): 473-491, September 2012 DOI: http://dx.doi.org/10.3329/bjar.v37i3.12125

Modeling Risk Attitudes in Evacuation Departure Choices

The decision of whether and when to evacuate can be characterized as decision making under risk. Presently, most models assume linear utility functions through which it is impossible to disentangle factors that influence risk attitudes and other factors that affect decision making under risk. There is a need to disentangle and study factors that affect risk attitudes from factors that affect an evacuee's preparation time. The aim in doing so is to provide planners and practitioners with an ability to measure a person's risk attitude and develop appropriate strategies that could motivate people to evacuate. This study is expected to connect the theory of risk developed in economic theory with behavior under threat. The paper uses the Hurricane Andrew response data in conjunction with time-dependent data on the probability of a hurricane strike and the category of the hurricane data to develop a model for evacuation departure choice. A constant relative risk aversion specification is used to model risk attitudes. The process of an evacuation is abstracted as an individual being given a choice between two lotteries: either to stay or leave. The results show that the model is able to predict the total number of evacuees and the time varying evacuation rates with reasonable accuracy. Factors such as time of day, length of time spent in a region, and whether a mandatory evacuation order was issued affected risk attitudes. The presence of children affected the amount of time spent preparing if the family decided to stay.

Probability weighting and loss aversion in futures hedging

We analyze how the introduction of probability weighting and loss aversion in a futures hedging model affects decision making. Analytical findings indicate that probability weighting alone always affects optimal hedge ratios, while loss and risk aversion only have an impact when probability weighting exists. In the presence of probability weighting, simulation results for a relevant range of parameter values suggest that probability weighting is dominant; changes in probability weighting affect hedge ratios relatively more than changes in loss and risk aversion. When decisions are made independently, loss aversion has a relatively small impact on hedge ratios for all parameter values, and risk aversion becomes important for only a narrow range of risk coefficients which produce implausible speculative behavior. When prior losses and gains affect behavior, hedging is influenced most by prior outcomes that influence risk attitudes, but this effect is still somewhat less than the consequences of changes in probability weighting.

Framing and Stakes: A Survey Study of Decisions under Uncertainty

Using a survey study of 261 decisions under uncertainty, we explore the factors that explain risk taking behavior and those that predict the importance of a decision. We also examine the relationship between framing and status quo, the similarity between monetary and non-monetary decisions, as well as the similarities and differences among our three subject groups (Undergraduates, MBAs and Executives). We find that framing, domain, and probability of success have a strong influence on the probability of taking risks. Other factors, such as group, importance of a decision, and whether the consequences are monetary or not, do not seem to influence risk attitudes. Our analysis of importance of a decision highlights the frequency with which a decision is taken as a key variable. Our results suggest that the cumulative effects of unimportant and frequent decisions are greater than the cumulative effects of very important and infrequent decisions.