Choice under uncertainty in developing countries

Arbeitspapier

We review experimental evidence collected from risky choice experiments using poor subjects in Ethiopia, India and Uganda. Using these data we estimate that just over 50% of our sample behaves in accordance with expected utility theory and that the rest subjectively weight probability according to prospect theory. Our results show that inferences about risk aversion are robust to whichever model we adopt when we estimate each model separately. However, when we allow both models to explain portions of the data simultaneously, we infer risk aversion for subjects behaving according to expected utility theory and risk seeking behavior for subjects behaving according to prospect theory. We conclude that the current practice of designing policies under the assumption that one or other explains all behavior is fundamentally flawed.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CeDEx Discussion Paper Series ; No. 2005-18

Classification and Topics

• Classification: Wirtschaft ; Microeconomic Analyses of Economic Development ; Microeconomic Behavior: Underlying Principles ; Criteria for Decision-Making under Risk and Uncertainty ; Field Experiments
• Subject: choice under uncertainty ; field experiments ; developing countries

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Harrison, Glenn W. ; Humphrey, Steven J. ; Verschoor, Arjan
• Event: Veröffentlichung
• (who): The University of Nottingham, Centre for Decision Research and Experimental Economics (CeDEx)
• (where): Nottingham
• (when): 2005

Further information

• Handle: http://hdl.handle.net/10419/67978
• Last update: 10.03.2025, 11:44 AM CET