Non-Expected Utility: What do the Anomalies Mean for Risk in Agriculture?

  • David E. Buschena
Chapter
Part of the Natural Resource Management and Policy book series (NRMP, volume 23)

Abstract

After more than a quarter century of analysis into its predictive value, the validity of the expected utility model (EU) is seriously called into question. These questions are particularly critical for agricultural economists since we have long relied on EU to assess behavior under the pervasive environment of risk in agricultural and natural resource issues. In this chapter, I will review some of the primary violations of EU, assess their implications, and consider various responses put forward in light of them. Questions addressed include:
  • What is the nature of behavior violating EU as commonly applied?

  • What do these anomalies tell us about modeling behavior under risk and what testable implications can be drawn from models incorporating them?

  • Can we still use EU for some risky choices in light of these anomalies; i.e., how robust are the anomalies to (1) the design of the risky questions, (2) real payoffs, and (3) experimental vs. non-experimental risky questions?

Keywords

Income Marketing Black Ball Dition Estima 

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Copyright information

© Springer Science+Business Media New York 2002

Authors and Affiliations

  • David E. Buschena
    • 1
  1. 1.Montana State UniversityUSA

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