Introducing socioeconomic characteristics into production analysis under risk

A theoretical framework is developed to study the effects of socioeconomic factors on farmers' risk attitudes and production decisions. No maintained assumptions about the individual's utility are required. A key element in this framework is the categorization of socioeconomic factors by their effect on the farmer's risk attitudes. A simple methodology for this categorization, based on the equivalence between the Arrow-Pratt measure of risk aversion and the probability of winning demanded, is proposed. The latter is illustrated with data collected in a survey of 180 Israeli farmers from 20 villages.