Investigating Consumer Participation Decision in Community-Supported Agriculture: An Application of Cumulative Prospect Theory
By: Zhao, Shuoli; Yue, Chengyan
Zhao, Shuoli; Yue, Chengyan, Investigating Consumer Participation Decision in Community-Supported Agriculture: An Application of Cumulative Prospect Theory, Journal of Agricultural and Resource Economics, Volume 45, Issue 1, January 2020, Pages 124-144
Using the framework of cumulative prospect theory (CPT), we investigate consumers’ decision to participate in community-supported agriculture (CSA) under risk and uncertainty. We analyze discrete choice experiment data using a CPT framework that allows for flexible reference points and individual preference heterogeneity. Comparison between model specifications suggests that the CPT model with the control of all risk parameters generates better goodness of fit than the expected utility model. Market sensitivity analysis further indicates that, while CSA operators benefit from transferring production risk partially to consumers, the level of transferred risk has a great impact on market share.