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American Economic Review: Vol. 104 No. 1 (January 2014)

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Violence and Risk Preference: Experimental Evidence from Afghanistan

Article Citation

Callen, Michael, Mohammad Isaqzadeh, James D. Long, and Charles Sprenger. 2014. "Violence and Risk Preference: Experimental Evidence from Afghanistan." American Economic Review, 104(1): 123-48.

DOI: 10.1257/aer.104.1.123

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.

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Online Appendix (449.81 KB) | Download Data Set (39.47 KB) | Author Disclosure Statement(s) (408.84 KB)

Authors

Callen, Michael (UCLA)
Isaqzadeh, Mohammad (American U Afghanistan)
Long, James D. (U WA)
Sprenger, Charles (Stanford U)

JEL Classifications

A12: Relation of Economics to Other Disciplines
C91: Design of Experiments: Laboratory, Individual
D12: Consumer Economics: Empirical Analysis
D74: Conflict; Conflict Resolution; Alliances
D81: Criteria for Decision-Making under Risk and Uncertainty
O12: Microeconomic Analyses of Economic Development
O17: Formal and Informal Sectors; Shadow Economy; Institutional Arrangements


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