Measuring Producers' Risk Preferences: A Global Risk‐Attitude Construct

Abstract

Abstract In applied agricultural economic research various risk‐attitude elicitation techniques are used. Here, we investigate whether risk‐attitude measures rooted in the expected utility framework are related to measures rooted in the multi‐item scale framework. Using a second‐order factor analytical model, and data obtained from personal computer‐guided interviews with 373 farmers, we investigate whether the common variance among the (latent) risk‐attitude measures can be accounted for by a global risk‐attitude construct. We find that the different risk‐attitude measures are related, and that the global risk‐attitude construct is significantly related to farmers' intention to use futures contracts. Our research suggests that farmers' risk attitude is a higher‐order characteristic that cannot be effectively extracted by a single measure.