Insurance contracts when individuals “greatly value” certainty: Results from a field experiment in Burkina Faso

Serfilippi, Elena; Carter, Michael R.; Guirkinger, Catherine

doi:10.1016/j.jebo.2019.07.017

Cited by 19 publications

(6 citation statements)

References 21 publications

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“…Perhaps more emphasis should be placed on understanding and managing framing, including what happens before the insurance choice is made (Thaler, 2015)? Johnson et al (1993), Carter et al (2015) and Serfilippi et al (2019) have made interesting observations regarding implications of how the insurance choice is presented to the grower. Many other questions remain, including what available information is carried to the decision point and how such information is processed.…”

Section: Resultsmentioning

confidence: 99%

Depressed demand for crop insurance contracts, and a rationale based on third generation Prospect Theory

Feng

Hennessy

2019

Agricultural Economics

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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.

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Section: Resultsmentioning

confidence: 99%

Depressed demand for crop insurance contracts, and a rationale based on third generation Prospect Theory

Feng

Hennessy

2019

Agricultural Economics

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“…However, though risk perception is an important determinant, it is not the only factor influencing riskmanagement behaviour. An individual's intention in using a risk-management strategy is influenced by social norms, one's attitude towards using a management strategy [13,65], one's resources base [34], access to capital and enabling institutional structures [10], an individual's aspirations [67], and the way risk information is communicated to farmers [68,69]. Future research could examine the extent to which a change in perception leads to actual change in risk-management behaviour, considering the aforementioned factors that also influence risk-management behaviour.…”

Section: Role Of Analysis Of the Interdependence Between Risks In Cha...mentioning

confidence: 99%

A Lower Threat than I Thought: How the Analysis of the Interdependence between Risks Influences Smallholder Farmers’ Perceptions

Kipato,

Dorward,

Clarkson

2023

Sustainability

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Smallholder farming businesses are exposed to numerous risks which significantly affect productivity, income, and farmers’ livelihoods. These risks are interdependent in nature and co-occur, which makes managing a single risk in isolation an inadequate approach. This study examined how the analysis of the interdependence between risks can influence farmers’ perceptions of risk. The study employed focus group discussions and participatory activities, which involved the use of Scored Causal Diagrams (SCDs) to analyse risks with farmers and assess changes in perception. The results showed that the analysis of the interdependence between risks influenced a change in perceptions of risk for farmers, by enabling farmers to identify the important risks, cause-and-effect relationships between risks, and the root causes of risks. This also led to changes in the farmers’ own perceived ability to manage these risks. The analysis of the interdependence between risks provides insight into the design of holistic approaches for the management of risks. It enables farmers to identify the cause-and-effect relationships between risks, identify risks which contribute substantially to hindering their farming goals, and identify entry points for managing multiple interdependent risks. A unique contribution of this study is it presents a process for eliciting and analysing farmers’ perceptions of the interdependence between risks and explores how such analysis contributes to changes in farmers’ perceptions of individual risks. These changes in perceptions of individual risks ultimately shape farmers’ decisions about whether and how to adapt risk-management behaviour.

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“…Limited access to assets is consistently shown to hamper the adoption of production technologies that are profitable and/or resilient to climate change (Cavanagh et al 2017;Deressa, Hassan and Ringler 2011;Serfilippi, Carter and Guirkinger 2020). Lifting such systemic barriers is absent from many efforts to increase investment in agricultural technology.…”

Section: Fostering Adaptive Capacity and Resource Access By Addressing Power Relationshipsmentioning

confidence: 99%

Food Systems After Covid-19

2021

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Measures to slow down the spread of Covid-19 have had profound effects on the food and nutrition security of poor and marginalised households and communities. This article provides an overview of the effects of Covid-19 on food systems across low- and middle-income countries using resilience and political economy lenses, before proposing approaches to build back resilient and equitable food systems. First, future interventions need to target structural issues that limit people’s agency in accessing nutritious and diverse food and production capital. Second, local innovation systems and institutions require investment to create a market environment that benefits domestic (small and medium) enterprises and agri‑food supply chain workers without jeopardising the environment. Third, interventions need to be informed by a diverse set of opinions that include the voices of the most marginalised.

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Insurance contracts when individuals “greatly value” certainty: Results from a field experiment in Burkina Faso

Cited by 19 publications

References 21 publications

Depressed demand for crop insurance contracts, and a rationale based on third generation Prospect Theory

Depressed demand for crop insurance contracts, and a rationale based on third generation Prospect Theory

A Lower Threat than I Thought: How the Analysis of the Interdependence between Risks Influences Smallholder Farmers’ Perceptions

Food Systems After Covid-19

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