Underconfidence and the Low-Experimentation Trap

Date: Friday, Sept. 12
Time: 11 am
Location: Arts Building Room 807, 9 Campus Dr., Saskatoon

Free and open to the public

About this event

Guest speaker: Dr. Nicholas Tyack (PhD), Van Vliet Assistant Professor, College of Agriculture and Bioresources, University of Saskatchewan

A talk in the Economics Speaker Series hosted by the Department of Economics

A rich literature in economics and psychology has examined the costs of overconfidence in a number of contexts. We explore the under-examined behavioral phenomenon of underconfidence and its connection to experimentation, providing an empirical test of the theoretical conjecture (Hestermann and Le Yaouanq 2021) that underconfident individuals are likely to experiment less (and over- confident individuals likely to experiment more) than unbiased decisionmakers.

We study underconfidence in the context of experimentation with new drought-tolerant ARICA rice varieties in West Africa, a climate change hot-spot where rice yields are expected to decline by more than 50% in the coming years unless farmers succeed in adaptation. Revealed preference elicitation of producer demand in Mali & Cote d’Ivoire (n=1957) confirms that underconfident producers (35% of the sample) are consistently willing to pay less for an experimentation kit with drought-tolerant ARICA seed than unbiased and overconfident rice producers. Additional analyses investigating the relationship of underconfidence to the stated willingness of smallholders to experiment, their past experimentation behavior, and their stated attitudes towards experimentation provide additional evidence that overconfident producers are generally more willing to experiment, while underconfident producers are less likely to engage in experimentation.

Info: economics.dept@usask.ca

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