An experimental analysis of the disposition effect in farmer’s selling behaviour

• Applicant: Professor Dr. Oliver Mußhoff
• Subject Area: Agricultural Economics, Agricultural Policy, Agricultural Sociology
• Term: from 2018 to 2023
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 400920441

Decisions regarding large-scale economic consequences have to be often met under uncertainty. In the agricultural context, the decision of economic time of sales is an example for a decision of this kind. While the influence of economic aspects regarding the optimal time of sale has already been discussed in literature, the analysis of non-monetary influence factors has only been discussed briefly. First remarks for the relevance of behaviour economic aspects can be derived from the finance sector. In this sector the disposition effect has been identified in the behaviour of investors as a robust, cognitive distortion, which can bring strong negative financial consequences with it. This effect has not been examined in detail in the agricultural sector so far. Furthermore, it is not yet known which determinants cause and influence the extent of the disposition effect. These research gaps are to be examined in this project. An economic experiment will be conducted with farmers, where farmers will sell stored harvest products. Their marketing decisions will be examined as regards of the disposition effects existence.The following questions have to be asked to concretise the aims of the project: 1. Is the marketing behaviour influenced by a disposition effect?2. How can the extent of the disposition effect be explained? Do the following play a role: a) Loss aversion, b) emotions such as regret and pride and/or c) socio-demographic & operational variables?3. Can the extent of the disposition effect be reduced by means of nudging? As a result of the project, key insights into farmer’s decision behaviour are generated, allowing the agricultural stakeholders recommended action is their aim in order to improve their income. Furthermore, the results regarding these measures/actions, which influence the disposition effect, are to be used for political impact assessment.

• DFG Programme: Research Grants