Choice under Uncertainty: Evidence from Ethiopia, India and Uganda*

Authors


  • *

     We are grateful to the UK Department for International Development (award no. R7617) and to the US National Science Foundation (NSF/HSD 0527675 and NSF/SES 0616746) for financial support. Supporting data and statistical code are stored in the ExLab Digital Library at http://exlab.bus.ucf.edu. We are grateful to Robin Cubitt, Oliver Morrissey and two referees for comments.

Abstract

We review experimental evidence collected from risky choice experiments using poor subjects in Ethiopia, India and Uganda. Using these data we estimate that just over 50% of our sample behaves in accordance with expected utility theory and that the rest subjectively weight probability according to prospect theory. Our results show that inferences about risk aversion are robust to whichever model we adopt when we estimate each model separately. However, when we allow both models to explain portions of the data simultaneously, we infer risk aversion for subjects behaving according to expected utility theory and risk-seeking behaviour for subjects behaving according to prospect theory.

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