potential payoffs. The sequence of decision problems was designed to start with choices that were extremely simple and to build slowly toward more complicated choice problems. For example, the first decision problem involved a choice between a degenerate lottery which paid 100 Kenyan shillings with certainty and a lottery involving a 50 percent chance of receiving 100 shillings and a 50 percent chance of receiving 120 shillings.<sup>7</sup> In contrast, the final decision problem was a choice between three non-degenerate lotteries.

This sequencing of choice problems from least to most complex served two purposes. First, the gradual increase in complexity was intended to help address the concern that respondents might not exert sufficient cognitive effort (for example, to calculate expected payoffs) when facing non-incentivized choice problems.<sup>8</sup> Respondents first considered options that could be evaluated with minimal cognitive effort, easing into the process of evaluating the expected utility of financial lotteries. Second, we wished to maximize the level of comprehension by subjects with low levels of numeracy. For this reason, we also limited each decision problem to a maximum of three lottery options, included only three easily understood probabilities (0, 0 _._ 5, and 1), and only considered lotteries over financial gains (rather than losses).<sup>9</sup> Our experimental instructions do not assume any familiarity with probabilities, averages, or expected values; lotteries are explained in terms of payoffs and uncertain but equally likely events.

When administering our experiment, survey enumerators began by presenting two practice decision problems which introduced the structure of the lottery choice questions to the respondent.<sup>10</sup> The first practice problem contained only degenerate lotteries — the respondent was asked to choose between 100 Kenyan shillings and 150 shillings; the second practice problem introduced the (non-degenerate) lottery concept in a setting with a clear “correct” answer: one lottery first-order 7The average US dollar value of 100 Kenyan shillings was 1.36 over the period during which the KLPS2 survey was in the field, from August 2007 to December 2009.

> 8There is some debate about the extent to which non-incentivized lottery choice questions correctly measure individual risk preferences. See Camerer (1995) for an overview, and Binswanger (1980) and Holt and Laury (2002) for seminal contributions. Existing evidence suggests that financial incentives induce greater risk aversion (Camerer and Hogarth 1999). Embedding non-incentivized decision problems in surveys has nonetheless proven successful in a number of field settings in developing countries, when conducting incentivized experiments at scale is not feasible (cf. Callen, Isaqzadeh, Long, and Sprenger 2014).

> 9Our risk preference elicitation method builds on those of Binswanger (1980), Eckel and Grossman (2008), Barr and Genicot (2008), Tanaka, Camerer, and Nguyen (2010), and Liu (2013), among others, but differs in its exclusive focus on extremely simple lottery structures and limited choice sets.

> 10Complete experimental instructions including images of the cards depicting lottery choice questions are included in the Online Appendix.

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