Using Cumulative Prospect Theory to Explain Anomalous Crop Insurance Coverage Choice

American Journal of Agricultural Economics

Volumn 97, Issue 5, 2015, Pages 1371-1384

  Babcock, Bruce A ^a  

^a IOWA STATE UNIVERSITY   (United States)

Author keywords

Crop insurance coverage; loss aversion; prospect theory

Indexed keywords

CROP PRODUCTION; DECISION SUPPORT SYSTEM; FARMERS ATTITUDE; INSURANCE SYSTEM; PLANNING THEORY; PROBABILITY; SUBSIDY SYSTEM; THEORETICAL STUDY;

EID: 84943534167     PISSN: 00029092     EISSN: 14678276     Source Type: Journal    
DOI: 10.1093/ajae/aav032     Document Type: Review

References (15)

1. Babcock, B. A., C. E. Hart, D. J. Hayes. 2004. Actuarial Fairness of Crop Insurance Rates with Constant Rate Relativities. American Journal of Agricultural Economics 86 (3): 563-75.
2. Babcock, B. A., D. Hennessy. 1996. Input Demand Under Yield and Revenue Insurance. American Journal of Agricultural Economics 78 (2): 416-27.
3. Barberis, N. C. 2013. Thirty Years of Prospect Theory in Economics: A Review and Assessment. Journal of Economic Perspectives 27 (1): 173-96.
4. Bocquého, G., F. Jacquet, A. Reynaud. 2014. Expected Utility or Prospect Theory Maximisers? Assessing Farmers' Risk Behaviour from Field-Experiment Data. European Review of Agricultural Economics 41 (1): 135-72.
5. Bougherara, D., L. Piet. 2014. The Impact of Farmers' Risk Preferences on the Design of an Individual Yield Crop Insurance. XIVth Congress of the European Association of Agricultural Economists, Ljubljana (Slovenia), August 26-29, 2014.
6. Brown, J. R., J. R. Kling, S. Mullainathan, M. V. Wrobel. 2008. Why Don't People Insure Late Life Consumption? a Framing Explanation of the Under-Annuitization Puzzle. American Economic Review 98 (2): 304-9.
7. Du, X., H. Feng, D. A. Hennessy. 2014. Rationality of Choices in Subsidized Crop Insurance Markets. Working paper 14-WP 545, Center for Agricultural and Rural Development, Iowa State University.
8. Eckles, D. L., J. V. Wise. 2013. Loss Aversion, Probability Weighting, the Demand for Insurance. Terry College of Business Working Paper, University of Georgia, August 2013. Farmdoc. Department of Agricultural, Consumer, Environmental Economics. University of Illinois. http://www. farmdoc.illinois.edu/.
9. Glauber, J. W., K. J. Collins. 2002. Crop Insurance, Disaster Assistance, the Role of the Federal Government in Providing Catastrophic Risk Protection. Agricultural Finance Review 62 (2): 81-102.
10. Just, R. E., L. Calvin, J. Quiggin. 1999. Adverse Selection in Crop Insurance: Actuarial and Asymmetric Information Incentives. American Journal of Agricultural Economics 81 (4): 834-49.
11. Kahneman, D., A. Tversky. 1979. Prospect Theory: An Analysis of Decision Under Risk. Econometrica 47 (2): 263-92.
12. Koszegi, B., M. Rabin. 2007. Reference-Dependent Risk Attitudes. American Economic Review 97 (4): 1047-73.
13. Rabin, M. 2000. Risk Aversion and Expected-Utility Theory: A Calibration Theorem. Econometrica 68 (5): 1281-92.
14. Tversky, A., D. Kahneman. 1992. Advances in Prospect Theory: Cumulative Representation of Uncertainty. Journal of Risk and Uncertainty 5 (4): 297-323
15. United States Department of Agriculture, Risk Management Agency. Summary of Business Reports. http://www3.rma. usda.gov/apps/sob/.