Two direct elicitation of utility (D.E.U.) techniques
were used to estimate risk attitudes of a group of agricultural
producers. The two elicitation techniques used in the
study were 1) an error-in-response model using a modified
Ramsey method, and 2) stochastic dominance with respect to a
function (SDF). The primary objective of the study was to
determine whether the two elicitation techniques yield consistent
estimates of risk attitudes. A second major objective
of the study was to provide additional information
about the distribution of risk attitudes among agricultural
producers.
The study confirmed the results of other research
efforts that the majority of risk attitude parameters of
agricultural producers lie within the range -.0001 and .001
with income measured in dollars [King and Robison, 1980]. The
study also supports previous research results which indicate
that a significant portion of decision makers exhibit risk
preferring behavior, at least over some ranges of incomes.
The error-in-response model classified 38.1% of the respondents
as risk preferring, 47.6% as risk neutral, and 14.3% as
risk averse. With only one exception, the SDF technique
elicited risk preferring attitudes for every respondent over
some range of income values.
Individual and aggregate tests for decreasing
(increasing) absolute risk aversion were conducted. No
respondents were found to exhibit increasing or decreasing
absolute risk aversion. The statistical comparison of the
two elicitation techniques was inconclusive. A paired t-test
failed to reject the null hypothesis of no difference in the
estimated risk attitudes. However, the correlation between
the two measures was virtually zero (-.046) suggesting that
the two measures of risk attitudes are not closely related.
The two elicitation techniques were also compared on
other grounds. Both elicitation techniques are designed to
prevent certainty bias that has plagued other D.E.U.
methods. The SDF technique is found to be superior in overcoming
possible interviewer bias. Neither technique is
superior in coping with probability bias.
The SDF technique is easier to implement but the error-in-
response questionnaire is easier to formulate. The error-in-
response model results in a specific estimate of the
respondent's risk attitude when the negative exponential
utility function is used. Based on the comparisons made in
the study, the SDF procedure is considered to be superior to
the error-in-response model for eliciting risk attitudes. / Graduation date: 1986
| Identifer | oai:union.ndltd.org:ORGSU/oai:ir.library.oregonstate.edu:1957/26745 |
| Date | 06 December 1985 |
| Creators | Winter, John R. |
| Source Sets | Oregon State University |
| Language | en_US |
| Detected Language | English |
| Type | Thesis/Dissertation |
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