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This article explores how farmer risk preferences are related to their perception of risk of climate change. We measure risk preferences and risk perceptions using a survey and a lab‐in‐the‐field experiment conducted with one of the most vulnerable groups to climate change in Latin America. We find that farmers that behave in accordance with the assumptions of Prospect Theory —a paradigm where risk preferences are characterized by risk aversion, loss aversion, and probability distortion—are more likely to perceive greater risks of climate change. Our results contribute to the understanding of farmer behavior in developing countries. Moreover, since perception of a risk is a necessary prerequisite for deciding on actions to adapt to climate risk, the results have important policy implications for the development and adoption of new technologies aimed at mitigating the effects of climate change (climate‐smart agricultural technologies).

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Efforts to improve cacao value chains often assume that production of fine and flavor varieties will raise smallholder incomes. Undertaking postharvest practices of fermentation and drying is another exercise assumed to increase value‐added capture by smallholder producers. This study employs household data from 340 cacao farms in 15 villages in coastal Ecuador during 2018 to empirically assess these assumptions. Contrary to the common belief of the international development community, we find that the production of fine and flavor cacao varieties has no association with the price received by small‐scale producers. This is mainly due to (i) low productivity and (ii) nonexistent price premiums. Findings also suggest that the use of postharvest practices of fermentation and drying may lead to substantial price responses irrespective of the type of variety grown. The results presented here have implications for program interventions aimed at increasing farmer revenue. Programs promoting the use of fine and flavor varieties alone might be misguided and can be improved by training in modern processing techniques, regardless of the variety produced. [EconLit Citations: O12, Q01, Q12, Q13].

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