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Updated: Jul 21, 2026
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Measuring the Subjective Value of Risky and Ambiguous Options using Experimental Economics and Functional MRI Methods
Published on: September 19, 2012
Farmers' Risk-Based Decision Making Under Pervasive Uncertainty: Cognitive Thresholds and Hazy Hedging
Kieran M Findlater1,2, Terre Satterfield1, Milind Kandlikar1,3
1Institute for Resources, Environment and Sustainability, University of British Columbia, Vancouver, BC, Canada.
Summary
Farmers in South Africa manage complex risks by satisficing, not optimizing, using practical strategies like cognitive thresholds and hazy hedging. This approach reflects real-world decision-making under uncertainty in climate risk management.
Area of Science:
- Agricultural Economics
- Decision Science
- Climate Change Adaptation
Background:
- Traditional economic models often assume rational optimization in farmer decision-making.
- These assumptions are problematic in agricultural economics and climate change adaptation studies.
- Agent-based modeling offers new avenues for empirical research on farmer behavior.
Purpose of the Study:
- To reconceptualize farmer decision-making using an in situ mental models approach.
- To analyze how farmers manage weather and climate risks alongside other daily risks.
- To investigate the empirical basis for farmer decision-making in South Africa.
Main Methods:
- In situ mental models approach.
- Analysis of decision-making coordination among 90 large-scale commercial grain farmers in South Africa.
- Assessment of how farmers manage weather, climate variability, and climate change risks.
Main Results:
- Farmers satisfice rather than optimize due to multifaceted uncertainty.
- Farmers exhibit imperfect information use, differential risk aversion, and multi-horizon decision-making.
- Two non-optimizing strategies, cognitive thresholds and hazy hedging, were identified for managing pervasive uncertainty.
Conclusions:
- Farmer decision-making is characterized by practical, non-optimizing strategies under uncertainty.
- Cognitive thresholds and hazy hedging are key naturalistic decision-making techniques observed in practice.
- Findings challenge simplifying assumptions and inform future behavioral research in agricultural and climate studies.
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