"Underconfidence and the Low-Experimentation Trap" Seminar

Please join the department of Food, Agricultural and Resource for the “Underconfidence and the Low-Experimentation Trap” seminar presented by Dr. Nicholas Tyack, Assistant Professor, Department of Agricultural and Resource Economics, University of Saskatchewan

Abstract

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 overconfident 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 and their attitudes towards experimentation provide additional evidence that underconfident producers are less likely to engage in experimentation.