Classification of Risk Preferences with Elicited Utility Data

Recently, several problems with elicited utility functions have emerged. This paper con-cerns a fundamental problem in risk preference classification with elicited data. For the sample in this research, different functional forms resulted in reversals in preference classifications. This paper suggests that preference classifications must be interpreted with caution. Agricultural economists have estimated utility functions for both normative and positive research on risky behavior. Initial experience with estimating utility func-tions created optimism concerning the usefulness of this technique in research and extension-Anderson et al. is an example of this viewpoint. More recently several studies have dampened this optimism. Binswager concluded that direct elicita-tion procedures do not yield reliable data over time and among different interview-ers. Whittaker and Winter supported this conclusion. They obtained significant regression coefficients of opposite sign from regressing risk aversion coefficients from utility functions elicited at two time