the optimal indexation of asymmetric information contracts the indexation of labour contracts is examined in a setting from which the hedging motive for partial indexation has been excluded since firms have better information than workers contracts must satisfy an incentive compatibility constraint the optimal degree of indexation depends on the incentives generated by the best fully indexed contract if firms would understate overstate the productivity of labour under this contract the optimal contract is partially more than fully indexed l indexation optimale des contrats quand l information est asymetrique l auteur examine l indexation de contrats de travail dans un monde dont on a elimine l indexation partielle dans le simple but de se couvrir comme les firmes ont une meilleure information que les travailleurs les contrats doivent satisfaire une contrainte de compatibilite le degre optimal d indexation depend des incitations engendrees par le meilleur contrat pleinement indexe si les firmes sous evaluent sur evaluent la productivte des travailleurs dans le contrat le contrat optimal est partiellement plus que pleinement indexe

involuntary unemployment and implicit contracts this paper provides an explanation of involuntary umemployment arising as a consequence of asymmetric information between firms and workers involuntary unemployment is defined as a situation where ex post gains to trade exist a model of labor contracts is developed where the allocations are not ex post optimal it is shown that inferiority of leisure is a necessary and sufficient condition for the existence of involuntary unemployment

wage employment contracts this paper studies the efficient agreements about the dependence of workers earnings on employment when the employment level is controlled by firms the firms superior information about profitability conditions is responsible for this form of contract governance under plausible assumptions such agreements will cause employment to diverge from efficiency as a byproduct of their attempt to mitigate risk it is shown that if leisure is a normal good and firms are risk neutral employment is always above the efficient level such a one period implicit contracting model cannot therefore be used to explain unemployment as a rational byproduct of risk sharing between workers and a risk neutral firm under conditions of asymmetric information

behavioural development economics lessons from field labs in the developing world abstract explanations of poverty growth and development depend on the assumptions made about individual preferences and the willingness to engage in strategic behaviour economic experiments especially those conducted in the field have begun to paint a picture of economic agents in developing communities that is at variance with the traditional portrait we review this growing literature with an eye towards preference related experiments conducted in the field we also offer lessons on what development economists might learn from experiments we conclude by sharing our thoughts on how to conduct experiments in the field and then offer a few ideas for future research

on the measurement of risk aversion from experimental data attitudes towards risk are measured for households in northern zambia using an experimental gambling approach with real payoffs that at maximum were equal to 30 of average total annual income per capita the results of the experiment show decreasing absolute risk aversion and increasing partial risk aversion determinants of risk aversion are investigated using random effects interval regression model exploiting the panel data structure of the repeated experiments wealth indicator variables are found to be significant and partial relative risk aversion decreases as wealth increases females are found to be more risk averse than males

stochastic production and heterogeneous risk preferences commercial fishers gear choices we present a model of fishers gear choice which allows for heterogeneity both in production technology and risk preferences and apply it on a panel of swedish trawlers stochastic revenue functions are estimated and used to predict the mean and standard deviation of revenue for each trip in a random parameters logit model we test if these predicted values explain gear choice a majority of fishers respond positively to increased mean and negatively to increased variability of expected landing values indicating risk aversion but also show a strong tendency to choose the same gear used on the previous trip

implicit contracts moral hazard and unemployment this paper considers a firm whose marginal revenue product of labor is a random variable we derive the form of an optimal long term contract between workers and the firm under the assumption that labor s marginal product is observed by the firm but not by the workers we show that the existence of asymmetric information causes unemployment to be greater than in a situation where information about labor s marginal product is public or where employment is determined in spot markets in particular unemployment can occur when the marginal product of labor exceeds the reservation wage

anomalies risk aversion economists ubiquitously employ a simple and elegant explanation for risk aversion it derives from the concavity of the utility of wealth function within the expected utility framework we show that this explanation is not plausible in most applications since anything more than economically negligible risk aversion over moderate stakes requires a utility of wealth function that is so concave that it predicts absurdly severe risk aversion over very large stakes we present examples of how the expected utility framework has misled economists and why we believe a better explanation for risk aversion must incorporate loss aversion and mental accounting

the impact of price floors on farmland investments a real options based experimental analysis price floors are a common instrument for market intervention to stimulate investments in some cases it can be observed that a price floor does not have the stimulating effect we experimentally analyse the investment behaviour of students who take the role of farmers the experiment considers an investment problem under uncertainty in a with price floor and a no price floor treatment stylizing a decision to take an ongoing farmland investment option we compare the actual investment behaviour with normative benchmarks of the net present value and the real options approach furthermore we look at order and learning effects the results show that the price floor has no significant impact on the willingness to invest whereas the effects of order were statistically significant the investment reluctance arising from an abolishment is stronger than the investment stimulation arising from the introduction of a price floor furthermore neither the net present value nor the real options approach is appr

simultaneous estimation of risk and time preferences among small scale cattle farmers in west africa this article reports results from economic field experiments with cattle dependent small scale farmers in west africa we simultaneously estimate both risk and time preferences and examine how demographic and socio economic characteristics are correlated with each preference the empirical basis for our analysis is a panel data survey of 211 households conducted in mali and burkina faso in 2007 and 2011 and economic experiments conducted with the heads of these households in 2011 the theoretical basis for our analysis is a discounted utility model we apply prospect theory and quasi hyperbolic discounting to estimate the present values of future utility streams we apply a maximum likelihood approach to jointly estimate risk and time preferences and to investigate the correlations among the preference parameters and observable characteristics we find that on average the west african cattle farmer is generally more risk averse and more patient than similarly situated respondents from asia additionally risk and time preferences are correlated with wealth education and religion we find that constraints in wealth and education are associated with greater risk aversion and impatience furthermore time spent in a koranic school is positively related to the overweighting of small probabilities greater risk taking behavior and patience

self selection and market power in risk sharing contracts abstract although the theory of optimal contracts and the principal agent model are now well established in the literature empirical support for this theory has been mixed at best we use economic experiments to test contract theory and assess the empirical relevance of two possible confounding factors that may explain why the theory has not received stronger empirical support first parameters of interest may be biased if agents self select into projects with differing risk profiles based on risk preferences second differing levels of market power on either side of the market could shift contract terms in ways contrary to theoretical predictions in general we find support for classical contract theory augmented to accommodate market power and self selection based on risk preferences we also find evidence for a third confound in the form of the characteristics of agents not party to the transaction affecting the terms of the contract

risk aversion and incentive effects new data without order effects holt and laury 2002 used a menu of ordered lottery choices to make inferences about risk aversion under various payment conditions the main results of that paper were a subjects are risk averse even for relatively small payments of less than 5 b risk aversion increases sharply with large increases in the scale of cash payoffs and c there is no significant effect from increasing the scale of hypothetical payment with a few exceptions noted in the paper all treatments began with a low payment choice followed by a choice with hypothetical payments that had been scaled up by 20 50 or 90 followed by a real cash decision with the same high payment scale 20 50 or 90 followed by a single final low 1 real payment choice those in the 90 treatment could earn amounts ranging from 9 00 to 346 50 in this task as glenn w harrison et al 2004 correctly note this design confounds order and treatment effects since the high real payment choice was always completed after the low real and high hypothetical payment tasks in a new experiment reported below we first seek to replicate harrison et al s finding that the order effect participating in a low payment choice before making a high payment choice magnifies the scale effect in a second treatment each subject completes the menu of lottery choices under just one payment condition 1 or 20 real or hypothetical thereby eliminating any order effects i new data

inequality social sanctions and cooperation within south african fishing communities abstract we explore the effect of income inequality and social attitudes on cooperation and sanctioning in nine south african fishing communities where allocation of fishing rights via quota and permits have been unequal and controversial we use a linear public goods experiment design with heterogeneous endowments and peer sanctioning in the punishment treatment aggregate contributions towards the public good are significantly higher amongst unequal groups with low endowment players contributing the greatest endowment share sanctioning is significantly lower in unequal groups but demand for punishment is similar irrespective of differences in relative costs free riding drives punishment but retaliation is another important motivator specifically in unequal groups in equal groups antisocial punishment of cooperators is more common the effect of real wealth and inequality on contributions and punishment is less salient possibly due to real wealth not being discernible in the experimental context interestingly social attitudes are important in explaining sanctioning behavior indicating that distrust in formal institutions and specifically in the top down quota allocation process may have a significant impact on behavioral outcomes and the effectiveness of community sanctioning mechanisms

gender differentiation in risk taking behavior on the relative risk aversion of single men and single women we relate an observed difference between single men sm and single women sw in attitudes towards risk to the higher value assigned to social status by sm than by sw in the marriage market low status carries a harsher penalty for sm than for sw because when selecting a partner the social status of a man is more important to a woman than the social status of a woman is to a man correlating social status with relative wealth we show how intensified distaste at experiencing low relative wealth reduces relative risk aversion

ensuring sustainable access to drinking water in sub saharan africa conflict between financial and social objectives summary we study a model explaining dynamics in water coverage that accounts for financial performances of utilities our dataset covers 25 sub saharan countries from 1996 to 2012 results suggest that access to water depends upon financial results but this relationship is not linear we find important access increases for relatively low levels of capital cost recovery and deterioration of access performances beyond a certain threshold our results are consistent with the literature about risks of corporatization and potential conflict between financial and social objectives in the water sector and they provide supporting quantitative evidence and recommendations for sector policies in the region

why u s wage and employment behavior differs from that in britain and japan if a poll were to be conducted among american academic economists to select the most mystifying economic phenomenon of our time surely the sticky nominal wage rate would emerge at or near the top of the list the slow and partial response of the nominal wage rate to changes in aggregate nominal spending has been a central postulate of macroeconomic theory for the past 45 years from keynes general theory down to the standard postwar textbook keynesian paradigm to the more modern fixed wage price models of robert barro and herschel grossman i976 and edmond malinvaud i977 unwilling passively to accept nominal wage rigidity as an unexplained assumption many labour market theorists have followed the lead of costas azariadis i975 and martin baily i974 in building models to explain rigid wages and layoff unemployment as the rational outcome of a profit maximising calculus as i pointed out in an early critique of the azariadis baily model i976a their assumptions cannot explain cycles in employment but rather why workers would want fixed incomes i e a fixed wage rate and fixed employment soon thereafter barro i977 went one step further and argued that contract theory is a facade which cannot explain why workers would choose a rigid wage and variable employment in preference to the classical equilibrium quantity of employment that equates the marginal product of labour with the marginal value of time now an examination of the evidence has led me to the realisation that rigid wages cannot provide the underpinnings for a universally valid theory of the business cycle simply because wages are not universally rigid i document below with postwar quarterly data that the share of fluctuations in the manufacturing wage bill taking the form of nominal wage changes as compared to changes in hours worked is five to ten times greater in britain and japan than in

efficient labor contracts with employment risk this article analyzes efficient employment agreements where the demand for consumption insurance can be satisfied by noncontractual means we assume that workers can save and that consumption is determined by a strong form of the permanent income hypothesis under conditions of asymmetric information about exogenous shocks to labor demand we derive a unique compensation schedule that efficiently guides decisions by both workers and employers efficient employment outcomes are generated without a need for third party enforcement or monitoring and workers choose a consumption policy that leaves them indifferent among realizations of labor demand within this solution it is both costless and efficient for workers to delegate employment decisions to the firm within the context of the model we analyze implications for the equilibrium distribution of wages and for empirical studies of labor supply

trade unions and economic efficiency in this paper i shall investigate a role for trade unions in increasing economic efficiency this role is enabling an improvement in the allocation of riskbearing between a firm and its employees the essential idea is straightforward if employers and employees are both risk averse the optimal wage contract will not leave one party bearing all the risk if state contingent contracts are possible grossman and hart 1981 give several reasons for firms being risk averse that firms are indeed risk averse would seem to follow from the fact that employees bear substantial risks few firms offer a job for life at a guaranteed real wage employees bear the risks of layoff redundancy and changes in the real value of their earnings with transactions costs in finding and moving to another job which may be substantial in periods of high unemployment these are real risks yet the states of the world in which these eventualities are to occur are rarely specified in any legally enforceable form indeed it is hard to imagine that they ever could be both because of the problem of envisaging all the relevant states of the world the bounded rationality of simon 1979 and because of the problem of defining those states in such a way that the courts could in the event of a dispute decide which state had occurred in the absence of legal enforceability of state contingent contracts the analysis depends on whether or not decisions about production must be made before a firm knows which state has occurred if they do not have to be then it is not essential to negotiate any contract before the firm knows the state but it may still be desirable from a risk sharing point of view to have a long term contract covering different possible states for that case hall and lilien 1979 and grossman and hart 1981 have argued that some degree of state contingency may be achieved by negotiating a contract which allows the firm in the light of the state which occurs to choose between limited combinations of employment and wages the firm may for example be permitted to reduce wages under the contract but only at the expense of reducing employment so that it is only in its interest to do so if marginal productivity is low this can overcome some of the moral hazard problems arising when states are observed only by firms but as grossman and hart show only at the cost of pareto inefficiency in the employment contract at an empirical level it may explain provisions for compulsory overtime at premium rates this type of contract will work only in the case in which the firm observes the state of the world before making employment decisions but given that

human development and economic sustainability abstract this paper attempts to integrate the concern for human development in the present with that in the future in arguing for sustainable human development it appeals to the notion of ethical universalism an elementary demand for impartiality of claims applied within and between generations economic sustainability is often seen as a matter of intergenerational equity but the specification of what is to be sustained is not always straightforward the addendum explores the relationship between distributional equity sustainable development optimal growth and pure time preference

risk aversion and expected utility theory a calibration theorem within the expected utility framework the only explanation for risk aversion is that the utility function for wealth is concave a person has lower marginal utility for additional wealth when she is wealthy than when she is poor this paper provides a theorem showing that expected utility theory is an utterly implausible explanation for appreciable risk aversion over modest stakes within expected utility theory for any concave utility function even very little risk aversion over modest stakes implies an absurd degree of risk aversion over large stakes illustrative calibrations are provided

a dual self model of impulse control we propose that a simple dual self model gives a unified explanation for several empirical regularities including the apparent time inconsistency that has motivated models of quasi hyperbolic discounting and rabin s paradox of risk aversion in the large and small the model also implies that self control costs imply excess delay as in the o donoghue and rabin models of quasi hyperbolic utility and it explains experimental evidence that increased cognitive load makes temptations harder to resist the base version of our model is consistent with the gul pesendorfer axioms but we argue that these axioms must be relaxed to account for the effect of cognitive load

a model of rationing and labour supply theory and estimation a number of authors most prominently clower 1965 and leijonhofvud 1968 have interpreted keynes s theory of unemployment as a disequilibrium model nominal price and wage rigidity prevent the labour market from clearing the actual level of employment is given by the minimum of the effective demand for labour and the effective supply general disequilibrium models of income and employment determination have been developed by barro and grossman 1976 and malinvaud 1977 the model has been extended to the open economy by dixit 1978 and to a two period rational expectations context by neary and stiglitz 1979 the econometric implications of the disequilibrium approach have been developed by goldfeld and quandt 1972 maddala and nelson 1974 and rosen and quandt 1978 among others in summary the disequilibrium approach has provided a fruitful context for analysing macroeconomic behaviour in a competitive walrasian system the notional supply of labour is defined as the amount of labour a worker wishes to provide when he can buy and sell as much as he would like in all markets subject only to his budget constraint and given prices and wages the notional supply of labour then is given by l where 1 c attains the indirect utility function

do non strategic sanctions obey the law of demand the demand for punishment in the voluntary contribution mechanism abstract the prospect of receiving a monetary sanction for free riding has been shown to increase contributions to public goods we ask whether the impulse to punish is unresponsive to the cost to the punisher or whether like other preferences it interacts with prices to generate a conventional demand curve in a series of experiments we randomly vary the cost of reducing the earnings of other group members following voluntary contribution decisions in our design new groups are formed after each interaction and no subject faces any other more than once so there is no strategic reason to punish we nonetheless find significant levels of punishment and we learn that both price and the extent to which the recipient s contribution is below the group mean are significant determinants of the quantity of punishment demanded moreover punishment is mainly directed at free riders even when it costs nothing to the punisher

further investigations into the factors affecting compliance with uk fishing quotas this paper reports the results of a more recent study of quota compliance in the u k fishery that was investigated in an earlier article in this journal hatcher et al 2000 the study collected more detailed data on fishermen s perceptions and experience of enforcement and sought to measure the financial incentive to cheat in addition whereas the earlier study used a binary approach to modelling the data we employed an orderedresponse model and included a number of scale regressors without transformation although we still find some evidence of normative influences on violation levels the results suggest that conventional economic incentives predominate in the fishery

employment with asymmetric information in an economy without informational and other distortions entrepreneurs and workers can write labor contracts that support a pareto optimal allocation of resources this paper is an attempt to characterize contracts when enterpreneurs are better informed about the state of nature than are their workers asymmetric information generally results in a suboptimal allocation of both risk and worker effort in particular if consumption and leisure are perfect substitutes employment will be less than fully pareto optimal in all but the most favorable states of nature

implicit contracts with asymmetric information and bankruptcy the effect of interest rates on layoffs this paper develops a model in which a firm writes labour contracts with workers and debt contracts with creditors firms have more information than do the owners of the factors of production and they are also subject to limited liability we show that if the limited liability constraint is binding then the employment level is inefficient relative to a situation of symmetric information the firm is then embedded into a partial equilibrium model in which the real rate of interest is exogenously determined we show that increases in the real rate of interest increase the inefficiency of the optimal employment contract and lead to layoffs in more states of nature than would occur at lower real interest rates recent literature in the area of implicit contracts has shown considerable interest in the assumption of asymmetric information henceforth a i papers by azariadis 1982 green and kahn 1982 and grossman and hart 1981 have all shown that a i will interfere with optimal risk sharing but although these models produce non walrasian outcomes it is not clear that they are capable of explaining the observed variations in employment over the business cycle in the absence of a link between the level of employment and other macroeconomic variables these new versions of contract theory are open to the charge that they are presenting a complicated explanation of frictional unemployment one potential link between variations in output and variations in intertemporal prices is suggested by models which explicitly allow for the possibility of bankruptcy sappington 1983 has shown that bankruptcy will generate inefficient outcomes even between risk neutral agents and farmer 1984 has shown that if sappington type contracts are incorporated into a macroeconomic structure then the resulting model predicts that bankruptcies will vary countercyclically over the business cycle although bankruptcy is important however it is unlikely that bankruptcies alone will account for all of the output loss during a recession the purpose of this paper is to show that the assumptions of a i and limited liability will generate a model in which the employment level is inefficient and in which the magnitude of this inefficiency varies systematically with the expected real rate of interest this model predicts that the observed increase in the incidence of layoffs during recessions is directly attributable to the effects of high interest rates on aggregate supply some evidence of the phenomenon to be explained is presented below

water and human development summary the article argues for a human development approach to the water crisis it explores the application of the entitlements approach ea and capabilities approach ca to water ea goes beyond volumetric or per capita measurements of water scarcity and directs attention to the structural and institutional issues concerning water inequalities ca focuses on links between water and wellbeing both strengthen the case for the human right to water and break down false distinctions between water for domestic and productive purposes despite challenges with operationalizing ca and ea a human development approach to water helps question the sector s traditional focus on utilitarianism and efficiency it also directs attention to equity and to the needs and interests of the marginalized and excluded

normative and social influences affecting compliance with fisheries regulations economic models of regulatory compliance in fisheries usually assume an instrumental determination of individual behavior in which the decision to comply or to violate depends primarily on the expected monetary costs and benefits policy implications tend as a result to focus only on deterrence that is increasing the expected monetary costs of violation more complete models of compliance behavior take into account factors such a social influence moral values and the perceived legitimacy of regulations and the regulatory authority the paper describes an investigation into the non monetary factors affecting compliance with output quota restrictions among fishermen in the united kingdom

poverty risk aversion and path dependence in low income countries experimental evidence from ethiopia in most low income countries rural households depend on mixed rain fed agriculture livestock production which is very risky due to numerous market failures there are few ways to shift risks to third parties the literature has focused on what determines the responses of households in such environments of special concern are path dependencies in which households experiencing failure are prone to further failure and potential poverty traps this paper estimates levels and determinants of risk aversion in the highlands of ethiopia we find high risk aversion and evidence that constraints have important impacts on risk averting behavior with perhaps significant implications for long term poverty the results also suggest the possibility of path dependence and offer insights into links between risk aversion and poverty traps copyright 2009 oxford university press

environmental entitlements dynamics and institutions in community based natural resource management abstract while community based natural resource management cbnrm now attracts widespread international attention its practical implementation frequently falls short of expectations this paper contributes to emerging critiques by focusing on the implications of intracommunity dynamics and ecological heterogeneity it builds a conceptual framework highlighting the central role of institutions regularized patterns of behavior between individuals and groups in society in mediating environment society relationships grounded in an extended form of entitlements analysis the framework explores how differently positioned social actors command environmental goods and services that are instrumental to their well being further insights are drawn from analyses of social difference new dynamic ecology new institutional economics structuration theory and landscape history the theoretical argument is illustrated with case material from india south africa and ghana

risk and ambiguity aversion behavior in index based insurance uptake decisions experimental evidence from ethiopia abstract index based insurance ibi is an innovative pro poor climate risk management strategy that suffers from low uptake evidence on the role of behavioral impediments in adoption of ibi is scant we conducted lab in the field experiments with 1139 smallholders out of whom 596 have adopted ibi in ethiopia to elicit their risk and ambiguity aversion behavior and examine whether risk and or ambiguity aversion can explain actual ibi uptake decisions our study suggests that an increase in risk aversion increases uptake but an increase in ambiguity aversion lowers uptake of ibi we also find evidence that an increase in risk aversion speeds up the uptake of ibi while an increase in ambiguity aversion delays the adoption of ibi

risk aversion and incentive effects comment charles a holt and susan k laury 2002 develop an experimental design to determine the risk attitude of an individual they use their observations to argue that increased incentives appear to change risk attitudes leading to greater risk aversion popular utility functions that do not allow for such effects are therefore misspecified building on this finding they estimate a flexible utility function that characterizes their aggregate data well but that does not assume constant absolute or relative risk aversion the basic holt and laury 2002 hl design should become an important tool for the interpretation and design of experiments in which risk attitudes could play a role however their most important result showing the effect of scaling up the stakes of the lottery choice task is confounded by a possible order effect an order effect occurs when prior experience with one task affects behavior in a subsequent task the primary methodological contribution of experiments in economics is to enhance control ideally such control makes the explanatory variables of interest in this case scale orthogonal to other explanatory variables such as order allowing clearer inferences about behavior than one could get from field econometric data we argue that not controlling for order effects results in a misspecification of utility functions that is as important as that of scale the subjects in the hl design were given sequences of three or four tasks as shown in table 1 task 1 involved choices over lotteries with a baseline level of prizes which we will refer to as the 1 scale task 2 involved hypothetical choices over prizes with a scaled up level of prizes either 20 50 or 90 task 3 repeated task 2 but with choices that involved real payoffs task 4 was a return to the baseline task with real 1 prizes in some sessions subjects were not given task 2 or task 3 what could one infer from the comparison of measured risk attitudes in the 1 and 20 tasks in hl unfortunately any observed difference could be due either to the scale of the prizes involved or the task order or some combination of both thus the effect of scale is intrinsically confounded with the possible effect of task order this is a logical flaw in their design which

choice under uncertainty evidence from ethiopia india and uganda we review experimental evidence collected from risky choice experiments using poor subjects in ethiopia india and uganda using these data we estimate that just over 50 of our sample behaves in accordance with expected utility theory and that the rest subjectively weight probability according to prospect theory our results show that inferences about risk aversion are robust to whichever model we adopt when we estimate each model separately however when we allow both models to explain portions of the data simultaneously we infer risk aversion for subjects behaving according to expected utility theory and risk seeking behaviour for subjects behaving according to prospect theory

time to change what to sow risk preferences and technology adoption decisions of cotton farmers in china this paper examines the role of individual risk attitudes in the decision to adopt a new form of agricultural biotechnology in china i conducted a survey and a field experiment to elicit the risk preferences of chinese farmers who faced the decision of whether to adopt genetically modified bt cotton a decade ago in my analysis i expand the measurement of risk preferences beyond expected utility theory to incorporate prospect theory i find that farmers who are more risk averse or more loss averse adopt bt cotton later farmers who overweight small probabilities adopt bt cotton earlier

risk aversion experimental evidence from south african fishing communities we estimate the risk attitudes of a large sample of individuals from various fishing communities along the west coast of south africa female fishers and rights holders are found to be more risk averse than their male counterparts while rights holders are found to be less risk averse relative to subjects without fishing rights risk attitudes are found to be correlated with compliance with fisheries regulations in particular a greater degree of risk aversion translates into a reduction in compliance furthermore in the case of gender female fishers and rights holders are more likely to comply with fisheries regulations

are commercial fishers risk lovers fishers are risk averse according to most empirical studies while expected utility theory predicts risk neutrality even for sizable stakes we test this prediction using data from a stated choice experiment with swedish commercial fishers our results show that only 48 of the fishers can be broadly characterized as risk neutral while 26 are modestly risk averse and 26 are strongly riskaverse fishers are more risk neutral the higher the fraction of their household s income comes from fishing sensitivity testing implies that modest stake decisions like a few days of fishing are not influenced by wealth level

dynamic labor contracts under asymmetric information abstract this paper discusses the distortion of employment within a two period asymmetric information contracting model in which an exogenous demand shock is serially correlated and is known only to firms the obtained results show that serial correlations of the state of nature can cause not only underemployment but also overemployment even when overemployment never occurs in the context of a static asymmetric information contracting model

risk preferences technology adoption and insurance uptake a framed experiment abstract despite the yield improvements associated with the adoption of new farming technologies and modern inputs technology diffusion amongst small scale farmers in developing countries is slow in this context given the inherently risky environments in which farmers in the developing world operate poor households are thought to be caught in a risk induced poverty trap specifically poorer households that are unable to insulate themselves from consumption risk avoid these risks by opting for lower return lower risk agriculture and thus do not benefit from technological innovation using a series of laboratory experiments in a south african setting this paper examines whether the provision of a framed index insurance product induces individuals to opt into riskier but potentially more profitable activities to do so we use a simple gambling task with real monetary prizes to elicit subjects risk preferences elicited risk preferences are applied to the uptake of credit and insurance in a series of framed insurance simulation games experiment participants are small scale and subsistence urban food growers overall the results of the experiment lend empirical weight to the poverty trap argument firstly a high degree of risk aversion is evident among the sample secondly risk averse individuals are more likely to opt into traditional agriculture reflected as traditional seeds in the experiment and are less likely to use modern farming inputs that require financing high yield varieties despite the availability of insurance the results indicate that the provision of index insurance is not a panacea for the problem of promoting technology diffusion to small scale farmers in the developing world but that residual production risk and basis risk must be considered in the contract design

location choice of commercial fishermen with heterogeneous risk preferences location choice of commercial fishermen with heterogeneous risk preferences author s johan a mistiaen and ivar e strand reviewed work s source american journal of agricultural economics vol 82 no 5 proceedings issue dec 2000 pp 1184 1190 published by oxford university press on behalf of the agricultural applied economics association stable url http www jstor org stable 1244248 accessed 25 01 2012 20 19

risk aversion and expected utility of consumption over time the calibration theorem by rabin rabin m 2000a risk aversion and expected utility theory a calibration theorem econometrica 68 1281 1292 rabin m 2000b diminishing marginal utility of wealth cannot explain risk aversion in kahneman d tversky a eds choices values and frames cambridge university press implies that seemingly plausible small stake choices under risk imply implausible large stake risk aversion this theorem is derived based on the expected utility of wealth model however cox and sadiraj cox j c sadiraj v 2006 small and large stakes risk aversion implications of concavity calibration for decision theory games econ behav 56 45 60 show that such implications do not follow from the expected utility of income model one may then wonder about the implications for more applied consumption analysis the present paper therefore expresses utility as a function of consumption in a standard life cycle model and illustrates the implications of this model with experimental small and intermediate stake risk data from holt and laury holt c a laury s k 2002 risk aversion and incentive effects amer econ rev 92 1644 1655 the results suggest implausible risk aversion parameters as well as unreasonable implications for long term risky choices thus the conventional intertemporal consumption model under risk appears to be inconsistent with the data c 2009 elsevier inc all rights reserved less

discrete modelling of supply response under uncertainty the case of the fishery abstract in the absence of complete control in a regulated industry effective management requires prediction of firms behavioral responses to public policy this paper develops a discrete choice model of supply response under uncertainty and applies it to fishery choice problems of new england fishing firms while fishermen demonstrate a bias towards remaining within the same fishery sufficient incentives in terms of changes in expected returns and risk are shown to elicit response due to extreme uncertainty concerning population dynamics of fish stocks a satisficing approach to management facilitated by this type of modelling may be more appropriate than bioeconomic optimization

producer decision making under uncertainty role of past experiences and question framing limited research examines the role of reference points or how uncertain outcomes are processed in producer decisions this study employs a survey containing a split sample choice experiment varying how uncertain outcomes are portrayed and assesses multiple candidate reference points results suggest that u s cattle producers use the best outcome experienced as reference points in their decisions and the method by which uncertain outcomes are presented impacts loss aversion marginal willingness to pay and market participation estimates this illustrates how research employing split samples multiple reference points and alternative methods of portraying uncertain outcomes may better identify producer decision making