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Abstract
We designed a field experiment involving real payments to elicit farmers’ risk
preferences. Farmers are a very interesting sample to study since risk has always played an
important role in agricultural producers’ decisions. Besides, European farmers may face more
risky situations in the future. In this context, it is very important for any economic analysis
focusing on agriculture to correctly assess farmers’ behaviour in the face of different sources
of risk. We test for two descriptions of farmers’ behaviour: expected utility and cumulative
prospect theory. We use two elicitation methods based on the procedures of Holt and Laury
(2002) and Tanaka et al. (2010) on a sample of 30 French farmers. The experiment consists in
asking subjects to make series of choices between two lotteries with varying probabilities and
outcomes. We estimate parameters describing farmers’ risk preferences derived from
structural models. We find farmers are slightly risk averse in the expected utility framework.
In the cumulative prospect theory frame, we find farmers display either loss aversion or
probability weighting, tending to overweight small probabilities and to underweight high
probabilities. In our study, expected utility is not a good description of farmers’ behaviour
towards risk.