how do people cope with natural disasters evidence from the great hanshin awaji kobe earthquake in 1995 this paper investigates the coping strategies employed by victims of the great hanshin awaji kobe earthquake in 1995 using a unique household data set we show that households that held a large amount of collateralizable assets before the catastrophe and were free from a binding borrowing constraint were able to maintain their consumption levels by borrowing in contrast households subject to a binding borrowing constraint before the disaster were unable to borrow to cope with the losses inflicted by the earthquake on the other hand both types of households relied on private transfers depending on the extent of the damage

poverty effects of food price escalation the importance of substitution effects in mexican households abstract recent food price increases reportedly caused significant numbers of households to fall into poverty particularly in the developing world most research into the welfare effects of these food price changes assumes constant demand or approximates second order substitution effects poverty forecasts with these assumptions may overestimate or underestimate the effect of food price increases in a nation where most households consume diverse food baskets we account for full substitution by calculating a theoretically consistent food demand system accounting for household responses to food price changes by decreasing some food purchases and increasing other food purchases we use mexican data to confirm the mitigation of adverse welfare effects from food price increases after accounting for country specific dietary preferences in modeling demand in comparison to previous literature our welfare measures predict theoretically consistent numbers of mexican households entering poverty due to recent food price changes

compound risk aversion ambiguity and the willingness to pay for microinsurance abstract index insurance in which payments are based on an index correlated with but not identical to individual losses has been faced with an unexpectedly low uptake despite its promise as a tool for poverty alleviation this paper offers new insights into the behavioral impediments to the uptake of index insurance we start from the observation that an index insurance contract appears to the farmer as a compound lottery with uncertainty about individual production outcomes as well as about the validity of the index as a reflection of individual losses adopting the smooth model of ambiguity aversion to this insurance problem we show that in theory this compound lottery structure per se will dampen the demand for index insurance using framed field experiments with cotton farmers in southern mali we elicited the coefficients of risk aversion and compound risk aversion the experimental results find that almost 60 of farmers are compound risk averse and that the distribution of compound risk aversion is such that it would nearly cut in half the potential demand for the standard index insurance contracts our results highlight the importance of designing contracts with minimal basis risk under compound risk aversion such a reduction in basis risk would not only enhance the value and productivity impacts of index insurance but would also assure that the contracts are purchased and have their anticipated impacts

the role of collateral in credit markets with imperfect information abstract the paper analyzes the structure of credit market equilibrium under imperfect information collateralization and credit rationing are compared as alternative means to cope with problems of adverse selection and moral hazard it is shown that lenders may use collateral as a self selection and incentive mechanism rationing occurs only if the borrowers collaterizable wealth is too small to allow perfect sorting or to create sufficiently strong incentives whenever there is rationing in an equilibrium some borrowers are charged the maximum amount of collateral

managing basis risk with multiscale index insurance agricultural index insurance indemnifies a farmer against losses based on an index that is correlated with but not identical to her or his individual outcomes in practice the level of correlation may be modest exposing insured farmers to residual basis risk in this article we study the impact of basis risk on the demand for index insurance under risk and compound risk aversion we simulate the impact of basis risk on the demand for index insurance by malian cotton farmers using data from field experiments that reveal the distributions of risk and compound risk aversion the analysis shows that compound risk aversion depresses demand for a conventional index insurance contract some 13 percentage points below what would be predicted based on risk aversion alone we then analyze an innovative multiscale index insurance contract that reduces basis risk relative to conventional single scale index insurance contract simulations indicate that demand for this multiscale contract would be some 40 higher than the demand for an equivalently priced conventional contract in the population of malian cotton farmers finally we report and discuss the actual uptake of a multiscale contract introduced in mali

the tempest short and long term consequences of a natural disaster for children s development abstract this paper analyzes the short and long run consequences of a natural disaster on children s education and health the particular focus lies on variation in idiosyncratic shocks to households using housing damages caused by a super typhoon as a proxy relying on individual panel data and a setting in which typhoons are a relatively rare event we find negative and persistent effects on children s education but no effects on children s health effects on education are likely driven by a shift in parental investments made to cope with the economic consequences of typhoon damages subgroup analysis suggests that results are stronger for girls children with no older siblings children from poor families and families with no strong family or social network

are some groups more vulnerable to macroeconomic shocks than others hypothesis tests based on panel data from peru abstract which socio economic groups are most vulnerable to welfare declines during a macroeconomic shock after clarifying the difference between poverty and vulnerability this paper presents an analytical framework and applies it to panel data from peru major findings are 1 households with better educated heads are less vulnerable 2 female headed households are no more vulnerable than male headed households 3 households with more children are more vulnerable 4 transfer networks that assist the poor in relatively stable periods do not protect them during a major shock unless they originate from outside peru and 5 peru s social security program is targeted neither to vulnerable nor to poor households but other transfer programs are better targeted

quality quantity and spatial variation of price this paper develops and implements a method for estimating price elasticities of demand using cross sectional household survey data geographically clustered households report unit values which when corrected for quality effects and for measurement error indicate the underlying spatial variation in prices and can be matched to variation in demand patterns a simple model of quality choice is proposed while the correction for measurement error exploits the clustered design of such surveys data from a 1979 household survey from the ivory coast are used to estimate price elasticities for beef meat fish cereals and starches copyright 1988 by american economic association

economic insights from internet auctions this paper surveys recent studies of internet auctions four main areas of research are summarized first we survey several studies that document and attempt to explain the frequently observed sniping or last second bidding behavior in these auctions second we summarize several methods proposed to quantify the distortions caused by asymmetric information in these markets most notably due to the winner s curse third we explore research about the role of reputation mechanisms installed to help combat these distortions finally we discuss what internet auctions have to teach us about auction design

do natural disasters affect the poor disproportionately price change and welfare impact in the aftermath of typhoon milenyo in the rural philippines summary this paper illustrates the sharp contrast in welfare impacts between the rich and the poor caused by typhoon milenyo in a philippine village we find that fish prices dropped sharply due to the damage caused to fish pens near the village leading to positive net welfare gains among the wealthy in contrast the poor do not consume much fish and thus did not gain from the sharp decline in prices finally consumption reallocation played an important role as an ex post risk coping measure albeit only among the wealthy who are relatively well protected against typhoons

impact of food inflation on poverty in the philippines abstract we simulate the impact of food inflation between june 2006 and june 2008 on poverty across different areas and between agricultural and non agricultural households we explicitly treat the spatial heterogeneity in food inflation and the differences in consumption and production patterns across households by merging household expenditure survey and price datasets at the provincial level or lower although some of the poor agricultural households may have escaped poverty the poorest of the poor whether they are in an agricultural household or not are severely and adversely affected by the food inflation

where and how index insurance can boost the adoption of improved agricultural technologies abstract remote sensing and other advances have led to an outpouring of programs that offer index insurance to small scale farmers with the expectation that this insurance will enable adoption of improved technologies and boost living standards despite these expectations the evidence to date on the uptake and impacts of insurance is mixed this paper steps back and considers theoretically where index insurance might be most effective and whether it should be offered as a standalone contract or explicitly interlinked with credit contracts emerging from this analysis is a set of nuanced recommendations based on the structure of risk and the property rights collateral environment

understanding the impact of high food prices in latin america since the late 1980s almost all latin american countries have adopted a series of far reaching economic reforms especially trade financial and capital account liberalization increased economic openness has gone hand in hand with large financial inflows particularly in the first half of the 1990s and has brought new sources of economic growth as a result economies grew inflation declined and there was a big surge in foreign cap ital inflows although overall growth slowed after 1995 the region has expe rienced strong growth in the past five years the best sustained performance since the 1970s with the exception of a handful of countries this economic growth has been accompanied by relatively modest inflation despite these positive results virtually all latin american countries share similar problems uneven economic growth unacceptably high poverty and malnutrition rates and lagging agricultural growth more than 60 percent of the region s poor live in rural areas where slow economic growth unequal distribution of assets inadequate public investment and public services and vulnerability to natural and economic shocks are major policy issues the 2007 08 food price crisis exacerbated these problems prior to the cri sis the region was considered relatively stable and capable of absorbing exter nal shocks thanks to its higher foreign exchange liquidity decreased public sector and external borrowing needs exchange rate flexibility lower exposure to currency interest rate and rollover risks in public sector debt portfolios and improved access to local currency loans nevertheless the food price cri sis severely affected most of the latin american countries in terms of inflation especially food inflation

the uncertainty effect when a risky prospect is valued less than its worst possible outcome expected utility theory prospect theory and most other models of risky choice are based on the fundamental premise that individuals choose among risky prospects by balancing the value of the possible consequences these models therefore require that the value of a risky prospect lie between the value of that prospect s highest and lowest outcome although this requirement seems essential for any theory of risky decision making we document a violation of this condition in which individuals value a risky prospect less than its worst possible realization this demonstration which we term the uncertainty effect draws from more than 1000 experimental participants and includes hypothetical and real pricing and choice tasks as well as field experiments in real markets with financial incentives our results suggest that there are choice situations in which decision makers discount lotteries for uncertainty in a manner that cannot be accommodated by standard models of risky choice from the time of bernoulli on it has been common to argue that a individuals tend to display aversion to the taking of risks and b that risk aversion in turn is an explanation for many observed phenomena in the economic world arrow 1971 p 90

cash transfers and index insurance a comparative impact analysis from northern kenya abstract cash transfers and index insurance have become popular interventions by development agencies worldwide yet surprisingly little is known about these programs comparative impacts on participant behavior or well being this paper exploits exogenous variation in program participation and panel data from kenya to compare the causal impacts of a cash transfer program hsnp and an index based insurance product ibli which were implemented contemporaneously among the same population we find that both programs benefit clients hsnp improves child health as measured by mid upper arm circumference muac and helps households maintain their mobility dependent livestock production strategies households with ibli coverage make productivity increasing investments reduce distress sales of livestock during droughts and see a marked increase in income per adult equivalent estimating the impacts per total program costs reveals that the two programs perform comparably on average while ibli s impacts per unit marginal cost are considerably larger than hsnp s

auctions versus posted price selling two popular selling methods posted price selling and auctions are compared here in an independent private values model without auctioning costs auctioning is always optimal when auctioning is costly auctions are still preferable if the marginal revenue curve is sufficiently steep the global steepness of the marginal revenue curve is found to coincide with the dispersion around the mean for a number of standard distributions finally the prices of the monopoly seller and of the social optimum are compared copyright 1993 by american economic association

a survey of recent empirical work concerning auctions in this paper the authors survey some recent empirical work concerning auctions first outlining two complementary approaches to the empirical analysis of auctions and then discussing several recent developments in the econometric analysis of field data concerning auctions

the distributional impacts of indonesia s financial crisis on household welfare a rapid response methodology analyzing the distributional impacts of economic crises is an ever more pressing need if policymakers are to intervene to help those most adversely affected they need to identify those who have been hurt most and estimate the magnitude of the harm they have suffered they must also respond in a timely manner this article develops a simple methodology for measuring these effects and applies it to analyze the impact of the indonesian economic crisis on household welfare using only pre crisis household information it estimates the compensating variation for indonesian households following the 1997 asian currency crisis and then explores the results with flexible nonparametric methods it finds that virtually every household was severely affected although the urban poor fared the worst the ability of poor rural households to produce food mitigated the worst consequences of the high inflation the distributional consequences are the same whether or not households are permitted to substitute toward relatively cheaper goods households with young children may have suffered disproportionately large adverse effects

inferring ascending auction participation from observed bidders abstract participation in internet auctions goes well beyond those who place a bid participants arrive in random order and if the auction s standing price has already exceeded a participant s valuation she will not bid even so her unreported valuation is a relevant part of demand for the item and in an alternate random order her bid would have been registered i provide a method to estimate the average number of participants from the average number of bidders per auction this enables estimation of the distribution of participant valuations from either the distribution of closing prices or the distribution of all observed bids

the effect of microinsurance on economic activities evidence from a randomized field experiment we report results from a large randomized field to study how access to formal microinsurance affects production and economic develop ment we induce exogenous variation in insurance coverage at the village level by randomly assigning performance incentives to the village animal husbandry worker who is responsible for signing farmers up for the insur ance we find that promoting greater adoption of insurance significantly increases farmers sow production and this effect seems to persist in the longer run moreover the increase in sow production in response to the sow insurance does not seem to be the result of the substitution of other livestock

insurance credit and technology adoption field experimental evidence from malawi this brief summarizes the insurance credit and technology adoption field experimental evidence from malawi the farmers were offered loans for the november 2006 planting season does production risk suppress the demand for credit the author implemented a randomized field experiment to ask whether provision of insurance against a major source of production risk induces farmers to take out loans to adopt a new crop technology the study sample was composed of roughly 800 maize and groundnut farmers in malawi where by far the dominant source of production risk is the level of rainfall the author randomly selected half of the farmers to be offered credit to purchase high yielding hybrid maize and groundnut seeds for planting in the november 2006 crop season the other half of farmers were offered a similar credit package but were also required to purchase at actuarially fair rates a weather insurance policy that partially or fully forgave the loan in the event of poor rainfall surprisingly take up was lower by 13 percentage points among farmers offered insurance with the loan take up was 33 0 percent for farmers who were offered the uninsured loan there is suggestive evidence that reduced take up of the insured loan was due to farmers already having implicit insurance from the limited liability clause in the loan contract insured loan take up was positively correlated with farmer education income and wealth which may proxy for the individual s default costs by contrast take up of the uninsured loan was uncorrelated with these farmer characteristics

public policy markets and household coping strategies in bangladesh avoiding a food security crisis following the 1998 floods abstract at their peak the 1998 floods covered two thirds of bangladesh causing severe damage to the major rice crop and threatening the food security of tens of millions of households in this paper we first highlight the contribution of government policy interventions including trade liberalization in the early 1990s to stabilization of rice markets during and after the flood then using a panel data set covering 750 households in three rounds over a 13 month period we analyze impacts of the flood on household assets consumption and nutritional outcomes finally we present empirical estimates of the contribution of rice market stabilization and government transfers to household food consumption

a theory of anticipated utility abstract a new theory of cardinal utility with an associated set of axioms is presented it is a generalization of the von neumann morgenstern expected utility theory which permits the analysis of phenomena associated with the distortion of subjective probability

insurance contracts when individuals greatly value certainty results from a field experiment in burkina faso abstract in discussing the paradoxical violation of expected utility theory that bears his name maurice allais noted that people tend to greatly value certainty allais observation implies that people will undervalue insurance relative to the predictions of expected utility theory because as conventionally constructed insurance offers an uncertain benefit in exchange for a certain cost pursuing this logic we implemented insurance games with cotton farmers in burkina faso on average farmer willingness to pay for insurance increases significantly when a premium rebate framing is used to render both costs and benefits of insurance uncertain we show that the impact of the rebate frame on the willingness to pay for insurance is driven by those farmers who exhibit a well defined discontinuous preference for certainty a concept that we adapt from the u v model of utility and measure with a novel behavioral experiment given that the potential impacts of insurance for small scale farmers are high and yet demand for conventionally framed contracts is often low the insights from this paper suggest welfare enhancing ways of designing insurance for low income farmers

informal risk sharing index insurance and risk taking in developing countries this paper presents preliminary findings from a research project that examines the interaction between informal risk sharing index insurance and risk taking we have randomized rainfall insurance contracts offered to cultivating and landless households in a set of indian villages where pre existing census data on caste networks allows us to characterize the nature and extent of informal risk sharing in a series of papers we study a how informal risk sharing mediates the demand for index insurance b whether index insurance or informal indemnification allows farmers to invest in risky technologies and c the general equilibrium effects of offering insurance contracts to cultivators or to agricultural laborers

pennies from ebay the determinants of price in online auctions this paper presents an exploratory analysis of the determinants of prices in online auctions for collectible united states one cent coins at the ebay web site starting with an initial data set of 20 000 auctions we perform regression analysis on a restricted sample of 461 coins for which we obtained estimates of book value we have three major findings first a seller s feedback ratings reported by other ebay users have a measurable effect on her auction prices negative feedback ratings have a much greater effect than positive feedback ratings do second minimum bids and reserve prices have positive effects on the final auction price in particular minimum bids appear only to have a significant effect when they are binding on a single bidder as predicted by theory third when a seller chooses to have her auction last for a longer period of days this significantly increases the auction price on average

depressed demand for crop insurance contracts and a rationale based on third generation prospect theory when actuarially fair insurance for a major risk is available then standard economic theory posits that those subject to the risk should insure in agriculture it is common for producers to decline contract offers where presubsidy premiums just cover average losses and subsidies are substantial this paper seeks to shed light on why demand is curtailed in a mail survey of u s corn and soybean producers we solicited willingness to pay wtp for actuarially fair insurance at different coverage levels we find demand to be so low that median wtp is no larger than fair premium when adjusted down by current subsidy rates which pay for one half or more of most premium charges wtp as a share of the fair rate is especially low when risk of loss is high there is limited evidence that respondents appreciate the convex relationship between coverage level and expected indemnity payoff third generation prospect theory is shown to be consistent with observed findings in particular a strong distaste for paying premium can be rationalized by loss aversion furthermore when high revenue outcomes are more likely than not that is negative skewness then higher loss aversion greater decision weight distortions and greater risk aversion will decrease wtp

bidder collusion at forest service timber sales allegations of bidder collusion at forest service timber sales in the pacific northwest were common in the 1970s of course prices may be low for reasons other than collusion we formulate an empirical model that allows for both bidder collusion and supply effects and in which we control for demand conditions noncooperative behavior in which a single unit is sold the standard auction model is a special case it is found to be definitively outperformed by a model of collusion we also find that supply effects are dominated by collusion in determining the winning bids in the market

the macroeconomic consequences of disasters abstract natural disasters have a statistically observable adverse impact on the macro economy in the short run and costlier events lead to more pronounced slowdowns in production yet interestingly developing countries and smaller economies face much larger output declines following a disaster of similar relative magnitude than do developed countries or bigger economies a close study of the determinants of these adverse macroeconomic output costs reveals several interesting patterns countries with a higher literacy rate better institutions higher per capita income higher degree of openness to trade and higher levels of government spending are better able to withstand the initial disaster shock and prevent further spillovers into the macro economy these all suggest an increased ability to mobilize resources for reconstruction financial conditions also seem to be of importance countries with more foreign exchange reserves and higher levels of domestic credit but with less open capital accounts appear more robust and better able to endure natural disasters with less adverse spillover into domestic production

rare disasters asset prices and welfare costs a representative consumer model with epstein zin weil preferences and i i d shocks including rare disasters accords with observed equity premia and risk free rates if the coefficient of relative risk aversion equals 3 4 if the intertemporal elasticity of substitution exceeds one an increase in uncertainty lowers the price dividend ratio for equity and a rise in the expected growth rate raises this ratio calibrations indicate that society would willingly reduce gdp by around 20 percent each year to eliminate rare disasters the welfare cost from usual economic fluctuations is much smaller though still important corresponding to lowering gdp by about 1 5 percent each year

ambiguity aversion decreases the impact of partial insurance evidence from african farmers indemnifying smallholder farmers against crop loss is thought to play an important role in encouraging the adoption of new technologies and facilitating productivity growth but to be infeasible due to information problems consequently there is interest in developing alternative partial insurance products examples include rainfall insurance and the limited liability inherent in credit contracts i argue that although these products may reduce information asymmetry ambiguity averse farmers struggle to assess whether the contracts reduce risk this problem is most pronounced when the production technology is ambiguous as is likely the case for new technologies i formalize this argument and test the theory using data from two rcts conducted in malawi and kenya comparative statics from the theory are consistent with both sets of data and i argue that income losses from ambiguity aversion may be substantial

smoothing consumption by smoothing income hours of work responses to idiosyncratic agricultural shocks in rural india while research has demonstrated that farm households in developing economies are able to protect consumption from idiosyncratic crop shocks little evidence shows how this is achieved this paper examines the extent to which labor markets allow households to shift labor from farm to off farm employment and the extent to which such a shift explains the observed lack of correlation between consumption and idiosyncratic crop shocks the empirical analysis uses a novel measure of the idiosyncratic crop income shock which utilizes information on start of season cropping choices to more accurately estimate household expectations of weather

auctions with resale markets an application to u s forest service timber sales when bidders anticipate an opportunity for resale trade the value of winning an auction is determined in part by the option values of buying and selling in the secondary market one implication is that a bidder s willingness to pay at an auction increases with the expected level of competition between resale buyers empirical evidence from auctions of timber contracts supports this prediction and rejects standard models that ignore resale the estimated effect is smaller after policy changes expected to diminish the prevalence of resale additional evidence supports the predicted presence of a common value element introduced by the resale opportunity

productivity credit risk and the demand for weather index insurance in smallholder agriculture in ethiopia the article explores the relationship between fertilizer use and the demand for weather index insurance wii among smallholder farmers in ethiopia we examine whether fertilizer use is profitable under current smallholder production conditions whether risk related factors affect fertilizer use and we estimate the returns to inputs in the agricultural production function in the absence of insurance we then study how these primitives of agricultural production functions relate to insurance demand the study compares a survey based estimate of willingness to pay with actual uptake for the weather insurance finding the stated and actual demand to be almost completely uncorrelated while those with high marginal returns to inputs say they would purchase insurance only those with low marginal returns actually do consistent with the stated purpose of the product as input insurance insurance demand proves to be highly responsive to the existence and amount of randomly allocated insurance vouchers jel classifications c83 g22 q12

unemployment insurance and unemployment spells this paper tests the effects of the level and length of unemployment insurance benefits on unemployment durations the paper particularly studies individual behavior during the weeks just prior to when benefits lapse higher unemployment insurance benefits are found to have a strong negative effect on the probability of leaving unemployment however the probability of leaving unemployment rises dramatically just prior to when benefits lapse individual data are used with accurate information of spell durations and the level and length of benefits the semiparametric estimation techniques used in the paper yield more plausible estimates than conventional approaches and provide useful diagnostics copyright 1990 by the econometric society

sharecropping and the interlinking of agrarian markets one of the often noted features of less developed agrarian economies is the existence of interlinkages among the land labor credit and product markets the landlord is often the supplier of credit he frequently purchases and markets the output of the tenant farmers and often sells raw materials and even consumption goods to his tenant farmers how can this phenomenon be explained what are the welfare consequences of attempts to restrict these practices which often seem to constitute restraints on free trade these are the questions to which this paper is addressed a general set of arguments applicable to both competitive and noncompetitive environments are presented to situations where all the terms of the contract are determined in an optimal way as well as to situations where many of the terms are specified institutionally section i examines interlinked credit and tenancy contracts section ii examines interlinked marketing and tenancy contracts section iii points out the possible interlinking between labor contracts and consumption goods markets and section iv presents the different equilibrium frameworks discussed in the paper such as monopoly monopsony competition and equilibria with surplus labor

technological innovations downside risk and the modernization of agriculture we use a randomized experiment in india to show that improved technology enhances agricultural productivity by crowding in modern inputs and cultivation practices specifically we show that a new rice variety that reduces downside risk by providing flood tolerance has positive effects on adoption of a more labor intensive planting method area cultivated fertilizer usage and credit utilization we find that a large share of the expected gains from the technology comes from crowding in of other investments therefore improved technologies that reduce risk by protecting production in bad years have the potential to increase agricultural productivity in normal years

identification of standard auction models this paper presents new identification results for models of first price second price ascending english and descending dutch auctions we consider a general specification of the latent demand and information structure nesting both private values and common values models and allowing correlated types as well as ex ante asymmetry we address identification of a series of nested models and derive testable restrictions enabling discrimination between models on the basis of observed data the simplest model symmetric independent private values is nonparametrically identified even if only the transaction price from each auction is observed for richer models identification and testable restrictions may be obtained when additional information of one or more of the following types is available i the identity of the winning bidder or other bidders ii one or more bids in addition to the transaction price iii exogenous variation in the number of bidders iv bidder specific covariates while many private values pv models are nonparametrically identified and testable with commonly available data identification of common values cv models requires stringent assumptions nonetheless the pv model can be tested against the cv alternative even when neither model is identified

personal networks and nonagricultural employment the case of a farming village in the philippines abstract this article based on an intensive village survey in the philippines analyzes the effects of personal networks on rural villagers access to nonagricultural occupations and the terms of employment given to them a key finding is that personal networks are selectively used to reduce transaction costs and their impacts on employment conditions vary by size and by location of enterprises we find that when villagers are employed in unskilled work at small enterprises those who use family relative networks receive wage premiums however if we limit our sample to small enterprises located near our study village the family relative network premiums become insignificant presumably because of the overriding influence of the community wide network within a narrow local community contrary to the case of small enterprises unskilled workers wages at large enterprises are not much affected by personal networks but are largely determined by years of schooling and work experience the recent developmen

agricultural decisions after relaxing credit and risk constraints the investment decisions of small scale farmers in developing countries are conditioned by their financial environment binding credit market constraints and incomplete insurance can limit investment in activities with high expected profits we conducted several experiments in northern ghana in which farmers were randomly assigned to receive cash grants grants of or opportunities to purchase rainfall index insurance or a combination of the two demand for index insurance is strong and insurance leads to significantly larger agricultural investment and riskier production choices in agriculture the binding constraint to farmer investment is uninsured risk when provided with insurance against the primary catastrophic risk they face farmers are able to find resources to increase expenditure on their farms demand for insurance in subsequent years is strongly increasing with the farmer s own receipt of insurance payouts with the receipt of payouts by others in the farmer s social network and with recent poor rain in the village both investment patterns and the demand for index insurance are consistent with the presence of important basis risk associated with the index insurance imperfect trust that promised

risk preferences are not time preferences risk and time are intertwined the present is known while the future is inherently risky this is problematic when studying time prefer ences since uncontrolled risk can generate apparently present biased behavior we systematically manipulate risk in an intertemporal choice experiment discounted expected utility performs well with risk but when certainty is added common ratio predictions fail sharply the data cannot be explained by prospect theory hyperbolic discounting or preferences for resolution of uncertainty but seem consistent with a direct preference for certainty the data suggest strongly a difference between risk and time preferences jel c91 d81 d91 understanding individual decision making under risk and over time are two foundations of economic analysis 1 in both areas there has been research to suggest that standard models of expected utility eu and exponential discounting are flawed or incomplete regarding time experimental research has uncovered evidence of a present bias or hyperbolic discounting frederick loewenstein and o donoghue 2002 regarding risk there are number of well documented departures from eu such as the allais 1953 common consequence and common ratio paradoxes an organizing principle behind expected utility violations is that they seem to arise as so called boundary effects where certainty and uncertainty are combined camerer 1992 harless and camerer 1994 and starmer 2000 indicate that violations of expected utility are notably less prevalent when all choices are uncertain this observation is especially interesting when considering decisions about risk taking over time in particular certainty and uncertainty are combined in intertemporal decisions the present is known and certain while the future is inherently risky this observation is problematic if one intends to study time preference in isolation from

equilibrium credit rationing of small farm agriculture it is often argued that externally imposed contractual restrictions lead to inequitable credit rationing this paper argues that unrestricted laissez faire markets may also inequitably ration credit a formal model which grants borrowers autonomy in credit application and use demonstrates that adverse incentive and selection effects may cause banks to endogenously impose interest rate restrictions and ration small farms out of the credit market consequently liberalization of financial markets may be insufficient to guarantee small farms access to credit

arriving in time estimation of english auctions with a stochastic number of bidders we develop a new econometric approach for the estimation of second price ascending bid auctions with a stochastic number of bidders our empirical framework considers the arrival process of new bidders as well as the distribution of bidders valuations of objects being auctioned by observing the timing of bidder arrival the model is identified even when the number of potential bidders is stochastic and unknown the relevance of our approach is illustrated with an empirical application using a unique dataset of art auctions on ebay our results suggest a higher impact of sellers reputation on bidders valuations than previously reported in cross sectional studies but the impact of reputation on bidder arrival is largely insignificant interestingly a seller s reputation impacts not only the actions of the bidders but the actions of the seller as well in particular experience and a good reputation increase the probability of a seller posting items for sale on longer lasting auctions which we find inc

the winner s curse reserve prices and endogenous entry empirical insights from ebay auctions internet auctions have recently gained widespread popularity and are one of the most successful forms of electronic commerce we examine a unique data set of ebay coin auctions to explore the determinants of bidder and seller behavior we begin by documenting a number of empirical regularities in our data set of ebay auctions next we specify and estimate a structural econometric model of bidding on ebay using our parameter estimates from this model we measure the extent of the winner s curse and simulate seller revenue under different reserve prices