Browsing by Subject "Risk attitudes"

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    Fire prevention and risk aversion among informal urban dwellers in Cape Town
    (2015) Kanyinji, Rabson; Visser, Martine; Brick, Kerri
    This paper attempts to provide experimental evidence on fire prevention and risk aversion among urban informal settlers using lottery choice data with real monetary prizes. The paper estimates the risk attitudes of a sample of 174 individuals from an informal housing development in Cape Town. The empirical analysis is performed within the expected utility theory specification, assuming constant relative risk aversion (CRRA) defined over the lottery prize. We tests the hypothesis that risk averse individuals will take precautionary measures in as far as possible to mitigate the risk of fire to their household. We find that individual-level fire prevention measures that are within the means of the households to effect, such as making sure that matches, lighters and paraffin are kept out of reach of children, is correlated with risk aversion, but measures, such as building of homes at least 3-5 meters from the neighbours, does not seem to be within the choice set of low-income informal dwellers. Our results further indicate that subjects who engage in fire prevention/fire safety strategies that require the "most effort" (that are most effective and costly) are significantly more risk averse relative to subjects engaging in fire safety measures that need "least effort". Contrary to expectation, distance from the main road, informal electricity connection, and the use of paraffin for lighting, heating and cooking are not correlated with risk aversion, indicating that irrespective of the risk profiles of decision makers, low-income households are often forced to make choices that increase their exposure to fire hazards.
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    Risk attitudes and affective states among young adults
    (2025) Raziya, Anzisca; Keswell, Malcolm
    This study examines how negative emotions influence risk attitudes and chance attitudes profiles among young adults using data from a novel behaviour modification programme targeted at young adults in South Africa. Risk attitudes are estimated structurally by assuming a stan-dard power utility function for the risky prospects they face in the risk elicitation experiment. The power parameter is recovered, and checks are performed for evidence of risk aversion and probability distortions. We find that while both the control and treatment groups exhibit risk aversion, the programme does not significantly alter risk aversion overall. However, significant treatment effects emerge with respect to probability distortion, suggesting that the programme fosters behaviour more closely aligned with expected utility maximisation. The programme appears to decrease the likelihood that individuals never experience anger or hostility. However, the effects on anger and hostility do not account for the observed treatment effects on probability distortions. Furthermore, individuals who never experience nervousness tend towards risk neutrality, while those who experience it are typically risk averse. Interestingly, both nervousness and fear correlate negatively with probability distortions, indicating a more pessimistic approach to risk among those who do not experience these emotions. This pattern holds across both the treatment and control groups, suggesting that these emotions remain relatively stable in the programme context. These findings emphasise the importance of considering affective states in designing interventions to address risky behaviours among young adults, contributing to improved public health outcomes.
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    Risk aversion: Experimental evidence from South African fishing communities
    (American Journal of Agricultural Economics, 2015-05-28) Brick, Kerri; Visser, Martine; Burns, Justine