Violence and Risk Preference: Experimental Evidence from Afghanistan

Country: 
File Type: 
File extension: 
PDF
Publication Year: 
2014
File size: 
2.6MB
Additional Authors: 
Mohammad Isaqzadeh and Charles Sprenger
Citation Information: 
American Economic Review 104(1), 123-48
Abstract: 

We investigate the relationship between violence and economic risk preferences in Afghanistan combining: (i) a two-part experimental procedure identifying risk preferences, violations of Expected Utility, and specific preferences for certainty; (ii) controlled recollection of fear based on established methods from psychology; and (iii) administrative violence data from precisely geocoded military records. We document a specific preference for certainty in violation of Expected Utility. The preference for certainty, which we term a Certainty Premium, is exacerbated by the combination of violent exposure and controlled fearful recollections. The results have implications for risk taking and are potentially actionable for policymakers and marketers.

Both the paper and a replication dataset are available at the link below.