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Risk, Overconfidence and Production in a Competitive Equilibrium AgEcon
Just, David R.; Cao, Ying; Zilberman, David.
Previous studies have found underestimation of risk, or overconfidence, to be pervasive. In this paper, we model overconfidence as a reduction in perceived variance. We generalize the analysis of Sandmo and examine the effects of competition on firms displaying overconfidence. Cases for both competitive equilibrium and imperfect competition are investigated. We show that overconfidence may strictly dominate rationality in a competitive market by leading risk averse producers to invest greater amounts and produce more. This leads to a higher average profit, and greater variance of profits, leaving the producer a greater probability of surviving competitive pressures. Despite the greater variance of profits, if enough producers underestimate their risk, they...
Tipo: Conference Paper or Presentation Palavras-chave: Overconfidence; Misperception; Production; Competition; Production Economics; Risk and Uncertainty.
Ano: 2009 URL: http://purl.umn.edu/49161
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Confirmatory Bias under Food-Borne Risk: A Lab Experiment AgEcon
Cao, Ying; Just, David R.; Wansink, Brian.
An experiment was conducted to investigate the interaction between consumers’ past eating behaviors, risk perceptions and future information processing procedure. In the study, participants were required to choose whether or not to eat chicken that was potentially be tainted with Avian Influenza (AI). Results showed that people decreased the consumption when facing ambiguous signals regarding the food quality, but would not cease to eat altogether. Due to a taste of consistency, participants updated their risk perceptions and judgments based on their eating behaviors. The more chicken individuals ate the more favorably they tended to rate the food, suggesting confirmatory bias. Even though consumers with previous experience could pick up signals faster,...
Tipo: Conference Paper or Presentation Palavras-chave: Cognitive Dissonance; Confirmation Bias; Self-compliance; Justification; Agricultural and Food Policy; Consumer/Household Economics; Food Security and Poverty; Health Economics and Policy; Institutional and Behavioral Economics; Marketing; Risk and Uncertainty; D03; D12; D83; Q18.
Ano: 2010 URL: http://purl.umn.edu/61312
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Hog Insurance Adoption and Suppliers' Discrimination: A Bivariate Probit Model with Partial Observability AgEcon
Cao, Ying; Zhang, Yuehua.
This paper explores the factors that impact insurance choices. Specially designed survey questions allow one to fully observe the demand tendency by the farmers and partially observe the supply tendency by the insurance company. A joint estimation of insurance decision by both supply and demand sides suggested that factors performing different roles in affecting insurance participation game. Farmer’s age and education have positive impact on insurance demand, but are indifference to the insurance providers. Insurance suppliers care more about farmers’ experience in the field, but this experience occasionally results in overconfidence for the farmers and hence, impedes insurance purchasing. Production scales, proxy by sow inventory, is put more weight by...
Tipo: Conference Paper or Presentation Palavras-chave: Livestock Insurance Choices; Bivariate Probit; Partial Observability; Agribusiness; International Development; Livestock Production/Industries; Risk and Uncertainty; C35; D13; Q12.
Ano: 2011 URL: http://purl.umn.edu/103158
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