Violence and Risk Preference: Experimental Evidence from Afghanistan
Michael Callen, Mohammad Isaqzadeh, James D. Long, Charles Sprenger
American Economic Review · 2014 · Volume 104 · Issue 1
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.
Keywords
Relation of Economics to Other Disciplines, Design of Experiments: Laboratory, Individual, Consumer Economics: Empirical Analysis, Conflict, Conflict Resolution, Alliances, Criteria for Decision-Making under Risk and Uncertainty, Microeconomic Analyses of Economic Development, Formal and Informal Sectors, Shadow Economy, Institutional Arrangements
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