Non-Optimal Behavior and Estimation of Risk Preferences

Non-optimal behavior due to budget constraint or credit availability is commonly observed in agricultural production. Not accounting for non-optimal behavior would result in biased estimates of risk preferences. A generalized model is developed in this article for estimating agents’ risk attitude accommodating both optimal and non-optimal behaviors. Results from Monte Carlo simulations suggest that estimation based on the proposed model yields consistent and unbiased risk preference estimates, whereas estimation based on the conventional modeling procedure produces biased results.


Issue Date:
2014-05
Publication Type:
Conference Paper/ Presentation
DOI and Other Identifiers:
Record Identifier:
https://ageconsearch.umn.edu/record/170636
PURL Identifier:
http://purl.umn.edu/170636
Page range:
1-19
Total Pages:
19
JEL Codes:
C13; C51; Q12; Q14




 Record created 2017-04-01, last modified 2019-08-29

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