How laboratory experiments could help disentangle the influences of production risk and risk preferences on input decisions

Présentation de Douadia Bougherara (INRA CEE-M- Montpellier)

Douadia Bougherara (INRA CEE-M - Montpellier) - © hcoda-crem

En collaboration avec Céline Nauges

Abstract : The purpose of this article is to further our understanding of input choices (such as pesticides or fertilizers) when producers face production risk that depends on a random shock and on the quantity of input used. Using laboratory experiments, we study the role of risk preferences and public policies (here, a lump-sum subsidy and insurance) on producers’ input decisions in two situations: i) a risk-decreasing input; and ii) a risk-increasing input. Our findings raise questions on the sensitivity of optimal input choices to risk preferences and the relevance of the expected utility model to describe farmers’ decisions.