Choices under Risk in Rural Peru

@inproceedings{Galarza2009ChoicesUR,
  title={Choices under Risk in Rural Peru},
  author={Francisco B. Galarza},
  year={2009}
}
This paper estimates the risk preferences of cotton farmers in Southern Peru, using the results from a multiple-price-list lottery game. Assuming that preferences conform to two of the leading models of decision under risk|Expected Utility Theory (EUT) and Cumulative Prospect Theory (CPT)|we nd strong evidence of moderate risk aversion. Once we include individual characteristics in the estimation of risk parameters, we observe that farmers use subjective nonlinear probability weighting, a… CONTINUE READING

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