Agricultural Economics Department
First Advisor
Cory Walters
Second Advisor
Simanti Banerjee
Third Advisor
Karina Schoengold
Date of this Version
Fall 9-17-2020
Abstract
In this study, we investigate the role of myopic loss aversion (MLA) risk preferences on pre-harvest grain marketing decisions using a laboratory experiment. Prospect theory parameters were estimated to measure MLA. We estimated a power function for utility and obtained power estimates indicating linear utility for gains and concave utility for losses. We obtained a loss aversion parameter estimate that suggests the presence of loss aversion. We found evidence of probability weighting for both gains and losses. We classified individuals into three categories based on their MLA status. They are no NMLA, MLA, and high loss aversion (HLA). We observed participants’ grain marketing behavior using a novel marketing simulation game called Marketing in a New Era (MINE). The findings of our study show that MLA does not significantly influence pre-harvest grain marketing behavior. However, we found that high loss aversion (HLA), significantly impact pre-harvest hedging positively. Specifically, we found that subjects with HLA significantly hedged more of their expected yield than subjects with no MLA (NMLA). We found evidence that suggests that buying crop insurance leads to increased profit. We found no significant difference between risk attitude and profit made.
Advisors: Cory Walters and Simanti Banerjee
Comments
A THESIS Presented to the Faculty of The Graduate College at the University of Nebraska In Partial Fulfillment of Requirements For the Degree of Master of Science, Major: Agricultural Economics, Under the Supervision of Professors Cory Walters and Simanti Banerjee. Lincoln, Nebraska: August, 2020
Copyright 2020 Iyore Eronmwon