Ferdinand M. Vieider

Preference Reversals for Ambiguity Aversion

This paper finds preference reversals in measurements of ambiguity aversion, even if psychological and informational circumstances are kept constant. The reversals are of a fundamentally different nature than the reversals found before because they cannot be explained by context-dependent weightings of attributes. We offer an explanation based on Sugdens random-reference theory, with different elicitation methods generating different random reference points. Then measurements of ambiguity aversion that use willingness to pay are confounded by loss aversion and hence overestimate ambiguity aversion. This paper was accepted by Teck Ho, decision analysis.

The effect of accountability on loss aversion

This paper investigates the effect of accountability-the expectation on the side of the decision maker of having to justify his/her decisions to somebody else-on loss aversion. Loss aversion is commonly thought to be the strongest component of risk aversion. Accountability is found to reduce the bias of loss aversion. This effect is explained by the higher cognitive effort induced by accountability, which triggers a rational check on emotional reactions at the base of loss aversion, leading to a reduction of the latter. Connections to dual-processing models are discussed.

RISK TAKING FOR ONESELF AND OTHERS: A STRUCTURAL MODEL APPROACH

Economic theory makes no predictions about social factors affecting decisions under risk. We examine situations in which a decision maker decides for herself and another person under conditions of payoff equality, and compare them to individual decisions. By estimating a structural model, we find that responsibility leaves utility curvature unaffected, but accentuates the subjective distortion of very small and very large probabilities for both gains and losses. We also find that responsibility reduces loss aversion, but that these results only obtain under some specific definitions of the latter. These results serve to generalize and reconcile some of the still largely contradictory findings in the literature. They also have implications for financial agency, which we discuss.

Measuring Risk Preferences in Rural Ethiopia

Risk aversion is generally found to decrease in income. Between countries, comparative findings with students suggest that people in poorer countries are more risk tolerant, potentially giving rise to a risk-income paradox. We test the robustness of this finding by measuring the risk preferences of 500 household heads in the highlands of Ethiopia. We find high degrees of risk tolerance, consistent with the evidence obtained for students using the same tasks. The level of risk tolerance is higher than for student samples in most Western and middle-income countries. We also find risk tolerance to increase in income proxies within our sample, thus completing the paradox.

The improved biomass stove saves wood, but how often do people use it ? evidence from a randomized treatment trial in Ethiopia

This paper uses a randomized experimental design and real-time electronic stove use monitors to evaluate the frequency with which villagers use improved biomass-burning Mirt injera cookstoves in rural Ethiopia. Understanding whether, how much, and why improved cookstoves are used is important, because use of the improved stove is a critical determinant of indoor air pollution reductions, and reduced greenhouse gas emissions due to lower fuelwood consumption. Confirming use is, for example, a critical aspect of crediting improved cookstoves’ climate change benefits under the United Nations Reducing Emissions from Deforestation and Forest Degradation Programme. The paper finds that Ethiopian households in the study area do use the Mirt stove on a regular basis, taking into account regional differences in cooking patterns. In general, stove users also use their Mirt stoves more frequently over time. Giving the Mirt stove away for free and supporting community-level user networks are estimated to lead to more use. The study found no evidence, however, that stove recipients use the stoves more if they have to pay for them, a hypothesis that frequently arises in policy arenas and has also been examined in the literature.

ASSIMILATION IN THE RISK PREFERENCES OF SPOUSES: ASSIMILATION IN THE RISK PREFERENCES OF SPOUSES

We use correlations in the risk preferences of spouses as a testbed of whether preferences are socially transmitted, rather than being innate as traditionally assumed in economics. We obtain rich measurements of the risk preferences of cohabiting spouses in the rural Ethiopian highlands. This allows us to use correlation coefficients at the level of the couple in regression analysis. We find a strong correlation between the strength of the correlation in risk preferences within a couple and how long a couple has been married. This provides direct evidence for assimilation in the risk preference of spouses, and thus for social transmission of preferences. Assortative mating appears to be less important. (JEL C93, D03, D80, O12)

Do Improved Biomass Cookstoves Reduce Fuelwood Consumption and Carbon Emissions? Evidence from Rural Ethiopia Using a Randomized Treatment Trial with Electronic Monitoring

This paper uses a randomized experimental design with real-time electronic stove temperature measurements and controlled cooking tests to estimate the fuelwood and carbon dioxide savings from an improved cookstove program in the process of being implemented in rural Ethiopia. Knowing more about how households interact with improved cookstoves is important, because cooking uses a majority of the fuelwood in the country and therefore is an important determinant of greenhouse gas emissions and indoor air pollution. Creating local networks among stove users generally appears to increase fuelwood savings, and among monetary treatments the most robust positive effects come from free distribution. The paper estimates that on average one improved stove saves approximately 634 kilograms of fuelwood per year or about 0.94 tons of carbon dioxide equivalent per year, which is about half of previous estimates. Using the May 2015 California auction price of

Preferences for REDD+ Contract Attributes in Low-Income Countries: A Choice Experiment in Ethiopia

13.39/ton, the carbon sequestration from each stove deployed is worth about

Measuring risk preferences in rural Ethiopia: risk tolerance and exogenous income proxies

12.59. Such carbon market offset revenues would be sufficient to cover the cost of the stove within one year.

Common components of risk and uncertainty attitudes across contexts and domains: Evidence from 30 countries

This paper informs the national and international policy discussions related to the adoption of the United Nations Reducing Emissions from Deforestation and Forest Degradation Programme. Effective program instruments must carefully consider incentives, opportunity costs, and community interactions. A choice experiment survey was applied to rural Ethiopian communities to understand respondents’ preferences toward the institutional structure of the program contracts. The results show that respondents have particular preferences about how Reducing Emissions from Deforestation and Forest Degradation programs are structured with regard to the manner in which the payments are divided between the households and the communities, the restrictions on using grazing land, and the level of payments received for the program. Surprisingly, restrictions on firewood collection do not significantly impact contract choice. The paper further analyzes the structure of the preferences by using attribute interaction terms and socio-demographic interaction terms. The analysis finds significant regional variation in preferences, indicating that Reducing Emissions from Deforestation and Forest Degradation should be tailored to specific regions. Finally, the marginal willingness to pay for attributes is calculated using the traditional preference space approach, as well as the more recent willingness-to-pay approach.