nep-upt New Economics Papers
on Utility Models and Prospect Theory
Issue of 2014‒12‒03
fifteen papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Harsanyi's aggregation theorem with incomplete preferences By Eric Danan; Thibault Gajdos; Jean-Marc Tallon
  2. Fair management of social risk By Marc Fleurbaey; Stéphane Zuber
  3. Expected Utility without Parsimony By Antoine Billot; Vassili Vergopoulos
  4. Regular economies with ambiguity aversion By Noé Biheng; Jean-Marc Bonnisseau
  5. Revealed preference with limited consideration By Demuynck T.; Seel C.
  6. Willingness to Pay to Reduce Wild Fire Risk in Wild land-Urban Interface: A Comparative Analysis of Public Programs and Private Actions By Christman, Laine; Kimberly, Rollins; Micheal, Taylor; Sohan, Agbonlahor
  7. Do demographics prevent consumer aggregates from reflecting micro-level preferences? By Koulovatianos, Christos; Schröder, Carsten; Schmidt, Ulrich
  8. Can Irrational Investors Survive in the Long Run?: The Role of Generational Type Transmission By Scott S. Condie; Kerk L. Phillips
  9. Non-Optimal Behavior and Estimation of Risk Preferences By Guan, Zhengfei; Wu, Feng
  10. Socially-Responsible Certification Schemes for Smallholder Coffee Farmers: Economics of Giving and Consumer Utility By Verteramo Chiu, Leslie J.; Gómez, Miguel I.; Kaiser, Harry M.; Yan, Jubo
  11. Time Preference and Health: The Problem of Obesity By Cavaliere, Alessia; De Marchi, Elisa; Banterle, Alessandro
  12. Income taxation, labour supply and housework: a discrete choice model for French couples By Jan Kabatek; Arthur Van Soest; Elena Stancanelli
  13. The Intrinsic Bounds of Risk Premium in the Markovian Consumption-Based CAPM By Jihun Han; Hyungbin Park
  14. How Does the Market Variance Risk Premium Vary over Time? Evidence from S&P 500 Variance Swap Investment Returns By Eirini Konstantinidi; George Skiadopoulos
  15. The Sustainable Choice: How Gendered Difference in the Importance of Ecological Benefits Affect Production Decisions of Smallholder Cacao Producing Households in Ecuador By Blare, Trent; Useche, Pilar; Grogan, Kelly A.

  1. By: Eric Danan (THEMA - Théorie économique, modélisation et applications - CNRS : UMR8184 - Université de Cergy Pontoise); Thibault Gajdos (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - École des Hautes Études en Sciences Sociales (EHESS) - CNRS : UMR7316); Jean-Marc Tallon (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: We provide a generalization of Harsanyi (1955)'s aggregation theorem to the case of incomplete preferences at the individual and social level. Individuals and society have possibly incomplete expected utility preferences that are represented by sets of expected utility functions. Under Pareto indifference, social preferences are represented through a set of aggregation rules that are utilitarian in a generalized sense. Strengthening Pareto indifference to Pareto preference provides a refinement of the representation.
    Keywords: Incomplete preferences; aggregation; expected multi-utility; utilitarianism
    Date: 2014–01
    URL: http://d.repec.org/n?u=RePEc:hal:journl:halshs-00941799&r=upt
  2. By: Marc Fleurbaey (Woodrow Wilson School and Center for Human Values - Princeton University); Stéphane Zuber (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: We provide a general method for extending fair social preferences defined for riskless economic environments to the context of risk and uncertainty. We apply the méthod to the problems of managing unemployment allowances (in the context of macroeconomic fluctuations) and catastrophic risks (in the context of climate change). It requires paying attention to individuals' risk attitudes and rationality properties of social preferences, revisiting basic ideas from Harsanyi's seminal work (Harsanyi, 1995). The social preferences that we obtain do not in general take the form of an expected utility criterion, but they always satisfy statewise dominance. We also show how non-expected utility individual preferences can be accommodated in the approach.
    Keywords: Social choice; uncertainty; economic environment; social risk
    Date: 2014–03
    URL: http://d.repec.org/n?u=RePEc:hal:journl:halshs-00973480&r=upt
  3. By: Antoine Billot (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris - Institut national de la recherche agronomique (INRA), LEMMA - Laboratoire d'économie mathématique et de microéconomie appliquée - Université Paris II - Panthéon-Assas : EA4442 - Sorbonne Universités); Vassili Vergopoulos (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)
    Abstract: This paper seeks to interpret observable behavior and departures from Savage's model of Subjective Expected Utility (SEU) in terms of knowledge and belief. It is shown that observable behavior displays sensitivity to ambiguity if and only if knowledge and belief disagree. In addition, such an epistemic interpretation of ambiguity leads to dynamically consistent extensions of non-SEU preferences.
    Keywords: Ambiguity; state of world; knowledge; dynamic consistency
    Date: 2014–03
    URL: http://d.repec.org/n?u=RePEc:hal:journl:halshs-01021392&r=upt
  4. By: Noé Biheng (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Jean-Marc Bonnisseau (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: We consider a family of exchange economies where consumers have multiprior preferences representing their ambiguity aversion. Under a linear independence assumption, we prove that regular economies are generic. Regular economies exhibit enjoyable properties: odd finite number of equilibrium prices, local constancy of this number and local differentiable selections of the equilibrium prices. Thus, even if ambiguity aversion is represented by non-differentiable multiprior preferences, economies retain generically the properties of the differentiable approach.
    Keywords: Demand function; general equilibrium; ambiguity aversion; multiprior preferences; regular economies; Lipschitz behavior
    Date: 2013–12
    URL: http://d.repec.org/n?u=RePEc:hal:journl:halshs-00922782&r=upt
  5. By: Demuynck T.; Seel C. (GSBE)
    Abstract: We derive revealed preference tests for models where individuals use consideration sets to simplify their consumption problem. Our basic test provides necessary and sufficient conditions for consistency of observed choices with the existence of consideration set restrictions. The same conditions can also be derived from a model in which the consideration set formation is endogenous and based on subjective, unconstrained beliefs about the prices. By imposing restrictions on these subjective beliefs, we obtain additional refined revealed preference tests. We illustrate and compare the performance of our tests by means of a dataset on household consumption choices.
    Keywords: Consumer Economics: Theory; Consumer Economics: Empirical Analysis; Criteria for Decision-Making under Risk and Uncertainty;
    JEL: D11 D12 D81
    Date: 2014
    URL: http://d.repec.org/n?u=RePEc:unm:umagsb:2014036&r=upt
  6. By: Christman, Laine; Kimberly, Rollins; Micheal, Taylor; Sohan, Agbonlahor
    Abstract: Wildfire threat is an intrinsic part of life in rural communities in the arid Western U.S. Western U.S. continues to experience a rapid population growth of Wildland-Urban Interface (WUI) areas, an increase in the frequency of wildfire due to increase human-caused ignition (Cardille et al. 2001), and overall fire severity due to over-accumulation of vegetation density on the surrounding public lands. Due to these trends, wildfire tends to have significantly higher economic cost associated with communities located in the WUI relative to wildfires on more remote public lands since WUI residences have an increased chance of damage (NIFC 2004). Fire protection services within these rural areas are scarce however; fire protection can be leveraged by wildfire risk mitigation actions done to both private properties and public lands adjacent to WUI areas. Private mitigation actions include creating a defensible space zone and use of fire resistant construction materials on the house, such as concrete siding or tiled roofing. Defensible space reduces the chance a wildfire will move from the public lands and damage or destroy a house by eliminating the combustible material and vegetation on the landscape within 30 feet of the home and promotes the use of fire resistant landscaping, i.e., well-irrigated lawns, deciduous shrubs and trees, xeriscaping, etc. Fire resistant construction materials reduce the chance a house will catch fire, given it ignites on the property. Public fuel reduction treatments remove strips of the native vegetation around the community creating a barrier between the public lands and the WUI which fire protection services can use to prevent fire from threatening homes. These public actions can be targeted to high priority areas within the community. Private and public provisions to reduce risk can impose considerable costs to residents and the individual risk of damage to a residence from a wildfire is rather low, therefore decisions about investment in these provisions can be seen as a gamble due to the uncertainty regarding the outcome. In one prospect, the resident can pay nothing and face uncertainty about a loss incurred from a wildfire. In another prospect, the resident can reduce the uncertainty by investing in risk mitigating provisions. Financial incentives for WUI residents in areas of elevated fire risk can be imposed in the form of policies and cost-sharing programs such as block grants. Such incentives can relieve some of the burden placed on residents and increase of overall level of defensible space thereby decreasing the level of risk facing WUI residents. Other incentives include educational components that help residents understand the risk they face. We explore how residents' value these provisions when the stakes are high but the chances of loss are low, as well as, how the value changes between public and private risk reduction provisions. Moreover, we explore the welfare loss given exogenous shifts in wildfire risk. Expected Utility Theory, a generally accepted and widely applied normative model of rational choice (Kahneman and Tversky 1979), would suggest rational individual will base investment decisions under uncertainty on comparison of expected utilities between the two prospects (Mongin 1997). The more risk adverse the individual, the more willing the individual is to forego a riskier situation for a more certain outcome. To investigate these issues, we measure the value of wildfire risk reduction to individual WUI residents using an experimental design based on a stated preference framework. We surveyed residents living in rural communities in Nevada that are representative of the different vegetation types, community designs, and population densities found within the Western U.S. We provide the homeowner two means to reduce the risk. The first method is investment in private defensible space on the property to lower the risk to the homeowner's property. The second method is investment is a community-wide fuel treatment program completed on public lands surrounding the community to lower the overall risk to the community and subsequently to the homeowners. In each case the homeowner was asked to state whether they would be attain those provisions at a given dollar amount. For the private provision the respondent was asked to pay a one-time cost. In the public provision, the cost was an annual fee. Within the survey instrument, the risk reduction from investment is explicitly stated to the homeowner. This reduction is explained as a decrease in the probability of damage to the house if provisions are taken. We employed a discrete choice, polychotomous, contingent valuation method that allowed the level of response intensity to be directly incorporated into the response option. The experiment design included 72 versions of the private provision and 24 versions of the public provision, which were randomly assigned to the respondents. For both provisions, there are multiple risk reduction categories that were randomly assigned to the respondents. Similarly, for both there were two year spans for which the risk reduction was valid, e.g, 5 or 10 years. Within the private provision there are three possible loss amounts ($50,000, $100,000, $200,000) to the homeowner, should a wildfire reach the home, which are also varied across respondents. Within the public provision, no loss amount was specified in order to view residents' value for reducing wildfire risk to the community in general. Our results indicate that willingness to pay (WTP) for private provisions of defensible space are higher than public provisions, i.e., $297 for the private provision and $47 per year for the public provision on average. When considering a 5 year time period the two WTP measures are relatively similar. When considering a 10 year period, the WTP for the public provision becomes greater however our models reveal respondents' WTP are not sensitive to the different time horizons. The similarity between the two provisions indicates that the incentives from private or public program would likely have similar outcomes in reducing risk, therefore it should be left to the policy makers to determine the priority each provision has to a given community. Our results for both provisions indicate that as risk reduction increases, so does WTP. For the private provision the average WTP for a 1% reduction is $147 and increases to $450 for a 4% reduction, while the average annual WTP for a 1% reduction is $36 and increases to $51 for a 4% reduction, suggesting people are considering the magnitude of the risk reduction when making decision about investment in fire mitigation provision across the board. From a policy perspective this would indicate people have a higher value for programs that strategically target areas where risk reduction is most effective. Furthermore, educational programs that inform residents about the how effective mitigation actions are from both private property and within the community as a whole can increase support of the provisions. Moreover, because the risk reduction is identical across the two provision but the expected value i.e., the reduction of risk and loss amount, was explicitly stated to the homeowner only for the private provision, the similarity between the two WTP estimates suggest that residents seem more concerned with the overall reduction in risk rather than the actual expected value gained from the provision. Furthermore, within the private provision our results reveal concavity in WTP over expected value which suggests the decreasing marginal value of investment. This finding is consistent with the EUT literature which assumes a diminishing marginal utility of wealth. This notion that marginal WTP incremental declines as expected value increases suggests incentives to increase private levels of defensible space only work up to a certain point. Beyond that, people begin to experience disutility with increased investment. Therefore, incentives to raise levels of defensible space in the most at-risk WUI communities must account for this lower marginal WTP and possible consider cost-sharing programs to offset this diminishing utility.
    Keywords: wildfire risk, wildland-urban interface, mitigation, contingent valuation, Community/Rural/Urban Development, Institutional and Behavioral Economics,
    Date: 2014
    URL: http://d.repec.org/n?u=RePEc:ags:aaea14:170703&r=upt
  7. By: Koulovatianos, Christos; Schröder, Carsten; Schmidt, Ulrich
    Abstract: Most simulated micro-founded macro models use solely consumer-demand aggregates in order to estimate deep economy-wide preference parameters, which are useful for policy evaluation. The underlying demand-aggregation properties that this approach requires, should be easy to empirically disprove: since household-consumption choices differ for households with more members, aggregation can be rejected if appropriate data violate an affine equation regarding how much individuals benefit from within-household sharing of goods. We develop a survey method that tests the validity of this equation, without utility-estimation restrictions via models. Surprisingly, in six countries, this equation is not rejected, lending support to using consumer-demand aggregates.
    Keywords: Linear Aggregation,Dynamic Representative Consumer,Household-Size Economies,Equivalent Incomes,Survey Method
    JEL: C42 E21 D12 E01 D11 D91 D31 I32
    Date: 2014
    URL: http://d.repec.org/n?u=RePEc:zbw:cfswop:484&r=upt
  8. By: Scott S. Condie (Department of Economics, Brigham Young University); Kerk L. Phillips (Department of Economics, Brigham Young University)
    Abstract: This paper considers whether expected utility maximizers who have incorrect beliefs can survive as controllers of a significant portion of market wealth in the long run. Unlike infinitely-lived agent models, where this is not the case, we consider a model with successive generations of investors. Each generation inherits wealth and investor type from the previous generation. We show that if rational parents produce only rational children, and irrational parents always produce only irrational children, then the results from the infinitely-lived setup carry through. However, if parents of one type can produce even a small fraction of children of the other type, then irrational investors will always control a non-vanishing portion of total wealth. Hence, understanding the exact nature of irrationality is key to understanding how markets behave.
    Keywords: irrationality, financial markets, natural selection, evolutionary dynamics, market dynamics
    JEL: D91 G02 G12
    Date: 2014–10
    URL: http://d.repec.org/n?u=RePEc:byu:byumcl:201409&r=upt
  9. By: Guan, Zhengfei; Wu, Feng
    Abstract: Non-optimal behavior due to budget constraint or credit availability is commonly observed in agricultural production. Not accounting for non-optimal behavior would result in biased estimates of risk preferences. A generalized model is developed in this article for estimating agents’ risk attitude accommodating both optimal and non-optimal behaviors. Results from Monte Carlo simulations suggest that estimation based on the proposed model yields consistent and unbiased risk preference estimates, whereas estimation based on the conventional modeling procedure produces biased results.
    Keywords: Corner Solution, Non-optimal Behavior, Risk Preferences, Budget Constraint, Monte Carlo Simulation, GMM Estimation., Agricultural Finance, Production Economics, Risk and Uncertainty, C13, C51, Q12, Q14,
    Date: 2014–05
    URL: http://d.repec.org/n?u=RePEc:ags:aaea14:170636&r=upt
  10. By: Verteramo Chiu, Leslie J.; Gómez, Miguel I.; Kaiser, Harry M.; Yan, Jubo
    Abstract: We study consumer preferences for socially-responsible certified coffee based on alternative ways to distribute the price premium of the product. We use Becker, DeGroot, and Marschak (BDM) auctions in an experimental setting to elicit consumer willingness to pay for two socially-responsible certified coffee systems: the existing Fair Trade and a hypothetical certification called Sustainable Trade. These certification schemes differ in the way the price premium is given to producers. In the Fair Trade certifications growers receive a cash transfer whereas in the Sustainable Trade certification a portion of the premium is allocated to a social project in the grower’s community. We segment consumers as donors and non-donors and show that individuals who donate have strong preferences for certification systems that support social projects relative no non-donors. We also find that consumer attitudes toward donating have a strong effect on their willingness to pay for certified coffee. This effect is higher for consumers that donate a higher part of their income to charities.
    Keywords: Social Certifications, Fair Trade, Altruism, Consumer Demand, Experimental Auctions., Consumer/Household Economics, Demand and Price Analysis, Food Consumption/Nutrition/Food Safety, Marketing,
    Date: 2014
    URL: http://d.repec.org/n?u=RePEc:ags:aaea14:170551&r=upt
  11. By: Cavaliere, Alessia; De Marchi, Elisa; Banterle, Alessandro
    Abstract: Consumer inability to make healthy food choices and to maintain a balanced diet is one of the main determinants that can explain the growth of overweight and obesity. Many studies have focused on the different factors affecting food behaviour, but only few of these have considered the role of time preference. The term time preference refers to the rate at which a person is willing to trade a current utility with a delayed utility. Generally, a high time preference is associated with a low will to renounce to the present gratification in order to obtain a benefit in the future. On the contrary, consumers with low time preference are more willing to undertake short-term costs to get future improvements. Indeed, people who highly discount the future are expected to suffer overweight and obesity more than others. In this paper we aim at investigating if consumer time preference could be related to overweight or obesity problems, also considering other factors which are predicted to affect BMI. In order to carry out an empirical analysis we conducted a consumer survey using face to face interviews. The sample was composed by 240 consumers living in North Italy. A specific questionnaire was designed and for the empirical estimation was used an Ordinal Regression Model, where the dependent variable is expressed in terms of consumer BMI. The results revealed that the searching frequency for nutrition claims is negatively correlated with BMI. This suggests that this kind of information is not very effective in catching overweight and obese consumer attention. Moreover, the results show that time preference is negatively related to BMI, meaning that to give more importance to taste than to healthy aspects of foods may lead consumers to increase their probability to put on weight.
    Keywords: time preference, BMI, consumer, Ordinal Regression Model., Agribusiness, Food Consumption/Nutrition/Food Safety, Health Economics and Policy, Research Methods/ Statistical Methods, Q18, D12, I18,
    Date: 2013–09
    URL: http://d.repec.org/n?u=RePEc:ags:iefi13:164754&r=upt
  12. By: Jan Kabatek (Tilburg University [Tilburg] - Netspar); Arthur Van Soest (Tilburg University [Tilburg] - Netspar); Elena Stancanelli (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: Earlier studies suggest that income taxation may affect not only labour supply but also domestic work. Here we investigate the impact of income taxation on partners' labour supply and housework, using data for France that taxes incomes of married couples jointly. We estimate a household utility model in which the marginal utilities of leisure and housework of both partners are modelled as random coefficients, depending on observed and unobserved characteristics. We conclude that both partners' market and housework hours are responsive to changes in the tax system. A policy simulation suggests that replacing joint taxation of married spouses' incomes with separate taxation would increase the husband's housework hours by 1.3% and reduce his labour supply by 0.8%. The wife's market hours would increase by 3.7%, and her housework hours would fall by 2.0%.
    Keywords: Time use; Taxation; Discrete choice models
    Date: 2014–04
    URL: http://d.repec.org/n?u=RePEc:hal:journl:hal-00966801&r=upt
  13. By: Jihun Han; Hyungbin Park
    Abstract: Risk premium is one of main concepts in mathematical finance. It is a measure of the trade-offs investors make between return and risk and is defined by the excess return over the risk-free interest rate earned per one unit of risk of an asset. The purpose of this article is to find the upper and lower bounds of the risk premium of an asset based on the prices of options in the market. One of key assumptions to achieve this is that the market is Markovian. Under this assumption, we can transform the problem into a problem of a second-order differential equation and then obtain the upper and lower bounds by analyzing the differential equation.
    Date: 2014–11
    URL: http://d.repec.org/n?u=RePEc:arx:papers:1411.4606&r=upt
  14. By: Eirini Konstantinidi (University of Manchester); George Skiadopoulos (Queen Mary University of London University of Piraeus)
    Abstract: We explore whether the market variance risk premium (VRP) can be predicted. First, we propose a novel approach to measure VRP which distinguishes the investment horizon from the variance swap's maturity. We extract VRP from actual rather than synthetic S&P 500 variance swap quotes, thus avoiding biases in VRP measurement. Next, we find that a deterioration of the economy and of the trading activity, increases VRP. These relations hold both in- and out-of-sample for various maturities and investment horizons and they are economically significant. Volatility trading strategies which condition on the detected relations outperform popular buy-and-hold strategies even after transaction costs are considered.
    Keywords: Economic conditions, Predictability, Trading activity, Variance swaps, Variance risk premium, Volatility trading
    JEL: G13 G17
    Date: 2014–10
    URL: http://d.repec.org/n?u=RePEc:qmw:qmwecw:wp732&r=upt
  15. By: Blare, Trent; Useche, Pilar; Grogan, Kelly A.
    Abstract: Ecuadorian women have traditionally been sidelined from full participation in the economy and have lacked equal political rights. Yet, Ecuador has made advances in gender equality in recent years. Women now have greater access to educational and career opportunities, equality in inheritance and martial property rights, and gained positions of authority in Ecuadorian society. However, these advances do not necessarily mean that Ecuadorian women have gained equity with men, especially in rural areas. Even though women legally have been granted greater equality in Ecuadorian society (Correia and van Ironkhorst 2000), many women, especially in rural areas and the coastal region of the country, have not equally participated in these advances. Many of these women have been excluded from utilizing these new rights, participating in economic activities, and being allowed to make important household and farm decisions (ECLAC 2011; Twyman 2012). Our research examines how the changing cultural norms and legal status in Ecuador impact women’s empowerment in the agricultural sector and in rural communities. We study women’s ability to influence household and production decisions. In particular, we examine the common view in the gender literature that sees women as the appropriate target group to mobilize for sustainable production and conservation (Plumwood 1992, Jackson 1993, Agrawal 2010). The cacao sector provides a particularly relevant case because of its economic and ecological importance to Ecuador and the region. This industry employs 12% of Ecuador’s economically active population (CORPEI 2009). In fact, cacao production is often the only source of cash income for many rural Ecuadorian households and traditionally the domain of men, who have usually managed household income and determined the economic activities of the household (ECLAC 2011). Thus, women’s involvement in cacao production is an important indicator of women’s status in a large share of rural Ecuador. The traditional cacao agroforests provide many ecological services such as habitat for many endangered plants and animals. However, they are not as profitable as the monoculture systems. So, smallholder households face a difficult choice between earning larger profits and protecting the ecosystem. Because of these economic and ecological concerns, promotion of cacao agroforests has been the focus of development efforts by the Ecuadorian government, nongovernmental organizations, and international donor agencies (Suarez 2013). Many of these institutions also have the additional goal of empowering women. Past research on gender relations in rural Ecuador only examined the differences in agricultural activities and asset ownership between women and men. There has been little research that examines women’s ability to influence household and production decisions. Due to the laws that protect female property rights, Ecuadorian women own 52% of all assets. However, women in the cacao growing region of coastal Ecuador are less likely to own important agricultural assets such as land than their counterparts in the Andean region, an area culturally distinct from the rest of Ecuador. Coastal women have ownership rights to 49% of agricultural land while women in the Andean had rights to 73% of the agricultural land (Deere and Diaz 2011). Although women may legally own the land, women are generally seen as helpers on cacao farms and are almost entirely excluded from marketing of the product (Ponton Cevallos 2005). Our study builds on this research to better understand women’s influence in the cacao sector and in rural households. We enhance the conjugal contract model developed by Carter and Katz (1997) to include a value for the nonmarket ecological and social benefits in the joint utility function. Through our innovative conceptualization of the model, a household may adopt the production method that does not maximize profits, cacao agroforests, if the utility from more nonmarket benefits are greater than the lost utility from larger profits. Male and female members of the household may differ in the value they place on these nonmarket benefits. Thus, they may have different preferences about whether the household adopts agroforestry or monoculture production systems. Women’s ability to influence production decisions could change the outcome of whether a household adopts production methods that are more sustainable. To determine the value that men and women place on these nonmarket benefits and the ability of women to influence household production decisions, we conducted 320 household interviews throughout coastal Ecuador from February through July, 2013. The household surveys examine not only women’s roles on cacao farms but also who makes production and management decisions on the farms. In addition, we implemented a choice experiment separately with the principle male and female member of the household. The choice experiment consisted of the household member choosing between pictures of two parcels to determine how much more profit he or she would need to receive in order to prefer the monoculture system over the agroforestry system. One picture had characteristics similar to a cacao agroforest and the other similar to a cacao monoculture field. The monoculture parcel was more profitable, but the cacao agroforests included nonmarket benefits. These nonmarket benefits included access to subsistence crops, enhanced soil quality, and a greater diversity of native plants and animals. Each respondent was presented with six choices, where the profits and characteristics of the agroforest differed randomly. By employing a multinomal Logit regression, we were able to estimate the value that men and women place on each of the attributes of the cacao agroforests (Birol et al. 2006) We found distinct differences between men and women in their land use preferences. During the focus group meetings, we discussed the benefits they received from agroforestry production systems. Women were more likely to prefer agroforestry production methods than men were. They were more concerned about food production such as raising plantains, oranges and other fruits than they were about profits. They also were more likely to prefer this production system because of the environmental benefits it provides and the ability to have diversified income sources. Although some men did prefer the agroforestry systems for many of the same reasons as the women did, especially since it provides a method to diversify production and price risk, the men were much more likely to prefer the monoculture system. The opportunity to obtain bigger yields and larger profits was more important to the male participants than the other environmental and social benefits provided by the agroforestry system. Preliminary results show that, despite heterogeneity in preferences across genders, men dominate household spending and production decisions even on the land that is owned by the women or jointly owned by men and women. Men manage the income in 36% of the households, women in 18% and both men and women in 46% of the households. Thus, women have a say in household spending decisions in only 64% of the households interviewed. Women have ownership rights in 44% of the land parcels as 56% of parcels are owned by men, 17% by women and 27% owned jointly. Yet, some women are excluded from managing the parcels they own. Seventy percent of the parcels are managed by men, 8% are managed by women, and 22% are managed by both genders. Women only participate in 30% of land use decisions. Only 17% of participants in agricultural training programs are women. Female empowerment in rural Ecuador, would likely encourage the adoption or continuation of cacao agroforests. Gender equity and female empowerment not only are important moral issue but also have large economic, social, and environmental impacts. Efforts to enhance gender equity in the Ecuadorian cacao sector would likely provide the additional benefits of encouraging the adoption and protection of sustainable production systems. References Agrawal, B. 2010. Gender and Green Governance: The Political Economy of Women's Presence Within and Beyond Community Forestry. Oxford University Press, Oxford, UK. Birol, E, K. Karousakis, and P. Koundouri. 2006. Using a Choice Experiment to Account for Preference Heterogeneity in Wetland Attributes: The Case of Cheimaditida Wetland in Greece. Ecological Economics 60: 145-156. Carter, M.R. and E. Katz. 1997. Separate Spheres and the Conjugal Contract: Understanding Gender-Biased Development. Intrahousehold Resource Allocation in Developing Countries: Methods, Models, and Policy. L. Haddad, J. Hoddinott, and H. Aderman eds. 95-111. Baltimore: John Hopkins. Coporación de Promoción de Exportaciones e Inversiones (CORPEI). 2009. Cacao. Ecuador Calidad de Origen. Quito, Ecuador Correia, M. and B. van Ironkhorst. 2000. Ecuador Gender Review. The World Bank. Washington D. C. Deere, C. D. and J. Contreras Diaz. 2011. Acumulación de Activos: Una Apuesta por la Equidad. Facultad Latinoamericana de Ciencias Sociales (FLASCO): Quito, Ecuador. ECLAC (UN Economic Commission for Latin America & the Caribbean). 2010. What Kind of State? What Kind of Equality? Santiago, Chile: ECLAC. Jackson, C. 1993. “Environmentalisms and gender interests in the Third World,” Development and Change, Vol. 24, No. 4. Potón Cevallos, J. 2005. Relaciones de Género en el Ciclo Productivo de Cacao: ¿Hacia un Desarrollo Sostenible?. Master’s Thesis. Facultad Latinoamericana de Ciencias Sociales (FLASCO). Plumwood, V. 1992. “Beyond the dualistic assumptions of women, men and nature,” Ecologist, Vol. 22, No. 1 (lYY2), pp. 8-13. Suarez, L. Director of Conservation International Ecuador. Personal Interview. 18 Jul. 2013. Twyman, J. 2012. Intra-Household Distribution of Assets and Wealth in Ecuador. Doctorate of Philosophy Dissertation. University of Florida.
    Keywords: gender, cacao, Ecuador, willingness to pay, choice experiment, Environmental Economics and Policy, Food Security and Poverty, International Development,
    Date: 2014
    URL: http://d.repec.org/n?u=RePEc:ags:aaea14:169782&r=upt

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