THE RELATIONSHIP BETWEEN RISK ATTITUDE AND STRENGTH OF PREFERENCE - ATEST OF INTRINSIC RISK ATTITUDE

In a field study, the concept of intrinsic risk attitude is investigat ed. Intrinsic risk attitude I concerns the relationship between risk a ttitude, measured by the utility function u(x), and strength of prefer ence, measured by the value function v(x). We study farmers' decision- making vis-a-vis price risk and obtain assessments of risk attitude an d strength of preference in two consecutive years in a sample of 253 r espondents. This design enables us to investigate the temporal stabili ty of intrinsic risk attitude. Our findings show that risk attitude an d strength of preference are two distinctive constructs. More specific ally, the hypothesis of a linear relationship between u(x) and v(x) is clearly rejected in favor of an exponential relationship. This expone ntial relationship implies that our respondents exhibit a constant abs olute intrinsic risk attitude for different price levels, during a tim e period. Differences between respondents in direction and degree of i ntrinsic risk attitude are substantial and the majority of the respond ents are intrinsically risk seeking. No statistically significant chan ge in intrinsic risk attitude could be detected between the two years of measurement. However, the correlation between measures across time appears to be low. In the discussion, issues for further research are identified.