@article{83afd2c571084aa69002ffbfcdafe107,
title = "Demand for Weather Index Insurance among Smallholder Farmers under Prospect Theory",
abstract = "Index insurance offers an innovative risk management solution for uninsured agricultural weather risk. We investigate the theoretical relationship between prospect theory risk preferences and characteristics of index insurance. We pair these theoretical findings with data from a lab-in-the-field experiment in Kenya. Empirically, we find that insurance demand is decreasing in loss aversion, and the negative marginal effect of loss aversion on insurance demand increases with basis risk and the insurance premium. Our theoretical and empirical results combined illustrate the importance of considering both risk and loss aversion, as well as basis risk, in understanding index insurance decisions.",
keywords = "Basis risk, D81, G22, index insurance, loss aversion, prospect theory, Q14, risk aversion",
author = "Soye Shin and Nicholas Magnan and Conner Mullally and Sarah Janzen",
note = "Funding Information: ☆ This study was funded by the International Initiative for Impact Evaluation (3ie) through Phase 1 of Thematic Window 13: Agricultural Insurance: Assessing the Impact of Programmes Targeted at Smallholder Farmers. The study was approved by the Institutional Review Board at Montana State University (SJ102116) and the trial is registered at https://www.socialscienceregistry.org/trials/2401. We thank our implementing partners for supporting the research, particularly the government of Kenya's KCEP-CRAL leadership team, World Agroforestry Center (ICRAF), ACRE Africa and the Kenya Promotions and Marketing Company (KPMC). In particular we wish to acknowledge the contributions of Moses Abukari, Joseph Alulu, Karl Hughes, Dennis Kaburu, Marup Hossain, Bilha Maina, Justin Muriuki, Judith Odoul, Sharon Onyango, Dickson Osewe, Bailey Palmer, and Patrick Sampao for assistance with implementation at various stages of the research project. W. Kip Viscusi, Greg Colson, Ellen McCullough, Chen Zhen, Sanghyo Kim, and Ja-Choon Koo provided useful feedback. All errors remain our own. Publisher Copyright: {\textcopyright} 2022",
year = "2022",
month = oct,
doi = "10.1016/j.jebo.2022.07.027",
language = "English (US)",
volume = "202",
pages = "82--104",
journal = "Journal of Economic Behavior and Organization",
issn = "0167-2681",
publisher = "Elsevier",
}