Agricultural Insurance and Bounded Rationality

Jana KřečkovaHelena Brožová

DOI 10.7160/aol.2017.090108
No 1/2017, March
pp. 91-97

Křečková, J. and Brožová, H. (2017) “Agricultural Insurance and Bounded Rationality", AGRIS on-line Papers in Economics and Informatics, Vol. 9, No. 1, pp. 91 - 97. ISSN 1804-1930. DOI 10.7160/aol.2017.090108.

Abstract

Bounded rationality influences the individuals making decisions. Rationality of decisions is limited by the complexity of the decision problem, the cognitive limitations of decision makers, and the time available to make the decision. One specific case of this situation is decision on the agricultural insurance. The success of agricultural activity is highly dependent on environmental influences in the region. These risks can destroy entire harvest or exterminate a whole herd of livestock. The Czech Republic, through the Support and Guarantee Fund for Farmers and Forestry, provides farmers and forest managers with a contribution to cover the costs of the payment of insurance against unforeseen damage for already several years by which it affects decision-making about insurance. The article discusses the rationality of decision on the agricultural insurance using decision model under risk.

Keywords

Decision-making, agricultural insurance, claim, alternative, payoff, risk.

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