Behavioral Biases and Firm Behavior: Evidence from Kenyan Retail Shops
American Economic Review
vol. 103,
no. 3, May 2013
(pp. 362-68)
Abstract
Many subjects in lab experiments exhibit small-stakes risk aversion, consistent with loss aversion. Those with greater math skills are less likely to show small-stakes risk aversion. We argue that departures from expected utility maximization may help explain why many firms in developing countries leave high expected return investments unexploited. We show that among a sample of Kenyan shopkeepers, inventories are negatively associated with small-stakes risk aversion and positively associated with math skills.Citation
Kremer, Michael, Jean Lee, Jonathan Robinson, and Olga Rostapshova. 2013. "Behavioral Biases and Firm Behavior: Evidence from Kenyan Retail Shops." American Economic Review, 103 (3): 362-68. DOI: 10.1257/aer.103.3.362Additional Materials
JEL Classification
- D22 Firm Behavior: Empirical Analysis
- D81 Criteria for Decision-Making under Risk and Uncertainty
- D15 Intertemporal Consumer Choice; Life Cycle Models and Saving
- G31 Capital Budgeting; Fixed Investment and Inventory Studies; Capacity
- O14 Industrialization; Manufacturing and Service Industries; Choice of Technology