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Abstract
Kahneman and Tversky’s Cumulative Prospect Theory (CPT) has proved to be better
suited for representing risk preferences than von Neumann and Morgenstern’s Expected
Utility Theory (EUT). We argue that neglecting this may explain to some extent why
farmers do not contract crop insurance as much as they are expected to. We model the
decision to contract an individual yield crop insurance for a sample of 186 French farmers.
We show that 21% of the farmers who would be expected to contract assuming that their
preferences are EUT, would actually not do so if their true preferences are in fact CPT.