Examining the Effect of Short-Term Affect on Farmers’ Risk and Time Preferences in Financial Decision-Making

Q3 Economics, Econometrics and Finance

Studies in Microeconomics Pub Date : 2021-12-01 DOI:10.1177/23210222211059609

T. Begho, O. I. Ambali

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Abstract

Farmers regularly make intertemporal decisions under risk or uncertainty. To improve how farmers behave when faced with decisions that have financial consequences, there is a need for a deeper understanding of farmers’ risk and time preferences. While the relationship between individual components of affect and risk preferences is well documented, the same cannot be said for holistic measures of affect on one hand, and for affect and time preferences on the other hand. The data analysed in this paper is the 2014–2015 Indonesian Family Life Survey Wave 5. The survey included experimental measures designed to elicit both risk and time preferences from the same subjects. We analysed the data using limited dependent variable regression models. Our findings strengthen what is known about the affect infusion model. With increased pleasant affect, farmers’ willingness to take risks increases significantly. The results also suggest that pleasant affect is associated with increased odds that farmers will choose future rewards in the long horizon but had no statistically significant effect on the short horizon. The practical implications are that an experience of pleasant affect before decision-making may cause the decision-maker (DM) to perceive a prospect as having high benefits and low risks. Pleasant affect may also induce lower sensitivity towards losses and play the role of a buffer which reduces the immediate negative impact of information that otherwise would prevent the DM from focusing on the long-term. JEL Classifications: C93, D81, D91

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金融决策中短期影响对农民风险和时间偏好的影响研究

农民经常在风险或不确定性下做出跨期决策。为了改善农民在面临具有财务后果的决策时的行为，需要更深入地了解农民的风险和时间偏好。虽然情感的各个组成部分和风险偏好之间的关系有很好的记录，但一方面对情感的整体衡量，另一方面对情绪和时间偏好的衡量，却不能如此。本文分析的数据是2014-2015年印尼家庭生活调查第五波。该调查包括旨在从同一受试者中引出风险和时间偏好的实验措施。我们使用有限因变量回归模型对数据进行了分析。我们的发现强化了关于情感输注模型的已知内容。随着愉快情绪的增加，农民承担风险的意愿显著增加。研究结果还表明，愉快的影响与农民在长期内选择未来奖励的几率增加有关，但在短期内没有统计学上的显著影响。实际意义是，决策前的愉快情感体验可能会使决策者（DM）认为前景具有高收益和低风险。愉快的情感也可能导致对损失的敏感性降低，并发挥缓冲作用，减少信息的直接负面影响，否则会阻止DM关注长期。JEL分类：C93、D81、D91

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Studies in Microeconomics Economics, Econometrics and Finance-Economics, Econometrics and Finance (all)

CiteScore

1.40

自引率

0.00%

发文量

期刊介绍： Studies in Microeconomics seeks high quality theoretical as well as applied (or empirical) research in all areas of microeconomics (broadly defined to include other avenues of decision science such as psychology, political science and organizational behavior). In particular, we encourage submissions in new areas of Microeconomics such as in the fields of Experimental economics and Behavioral Economics. All manuscripts will be subjected to a peer-review process. The intended audience of the journal are professional economists and young researchers with an interest and expertise in microeconomics and above. In addition to full-length articles MIC is interested in publishing and promoting shorter refereed articles (letters and notes) that are pertinent to the specialist in the field of Microeconomics (broadly defined). MIC will periodically publish special issues with themes of particular interest, including articles solicited from leading scholars as well as authoritative survey articles and meta-analysis on the themed topic. We will also publish book reviews related to microeconomics, and MIC encourages publishing articles from policy practitioners dealing with microeconomic issues that have policy relevance under the section Policy Analysis and Debate.