Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/67978
Authors: 
Harrison, Glenn W.
Humphrey, Steven J.
Verschoor, Arjan
Year of Publication: 
2005
Series/Report no.: 
CeDEx Discussion Paper, The University of Nottingham 2005-18
Abstract: 
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 behavior for subjects behaving according to prospect theory. We conclude that the current practice of designing policies under the assumption that one or other explains all behavior is fundamentally flawed.
Subjects: 
choice under uncertainty
field experiments
developing countries
JEL: 
O12
D01
D81
C93
Document Type: 
Working Paper

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