Ambiguity Aversion As A Predictor Of Technology Choice: Experimental Evidence From Peru

The lack of adoption of new farming technologies despite known benefits is a well-documented phenomenon in development economics. In addition to a number of market constraints, risk aversion predominates the discussion of behavioral determinants of technology adoption. We hypothesize that ambiguity aversion may also be a determinant, since farmers may have less information about the distribution of yield outcomes from new technologies compared with traditional technologies. We test this hypothesis with a laboratory experiment in the field in which we measure risk and ambiguity preferences. We combine our experiment with a survey in which we collect information on farm decisions and identify market constraints. We find that ambiguity aversion does indeed predict actual technology choices on the farm.

Policy implications 
Helping farmers overcome ambiguity around outcomes of using innovative techniques can make them more likely to experiment with new methods.
Warnick, J. C. E., Escobal, J., & Laszlo, S. C. (2011). Ambiguity aversion and portfolio choice in small-scale Peruvian farming. The BE Journal of Economic Analysis & Policy, 11(1).