RISK AVERSION, SUBJECTIVE BELIEFS, AND FARMER RISK MANAGEMENT STRATEGIES

Building upon early theoretical work that established the underlying principles of deci-sion making in settings involving risk (e.g. Arrow 1965; Pratt 1964; Von Neumann and Morgenstern 1944), a substantial body of experimental literature has developed inves-tigating the theory of risk in laboratory and field settings in order to better understand agent behavior and market outcomes. These experimental explorations are motivated by the ubiquity of risk across the spectrumof deci-sions that agents make on a daily basis. In agricultural production, where farmers ’ yields and revenue are dependent upon numerous largely exogenous factors such as weather conditions and price fluctuations, risk and uncertainty is omnipresent in farming deci-sions. Ultimately, risk and uncertainty influ-ence crop-selection and crop-rotation schemes (El-Nazer andMcCarl 1986), technology adop-tion (Purvis et al. 1995), environmental degra-dation and policy compliance (Ozanne,Hogan, andColman2001),andcrop insurancemarkets. Early experimental studies focusing on deci-sion making under uncertainty revealed tha