Determining the Degree of Risk Aversion Using Multi-Criteria Decision-Making Analysis: A Case Study of Farmers in Goharbaran Region of Sari

Given the importance of understanding the agricultural risk behavior for useful policy making in agriculture, this study aimed at determining the degree of absolute risk aversion of farmers in Goharbaran region of Sari County in Iran using multi criteria decision making (MCDM) analysis. Then, the relation between the degree of risk aversion of the farmers and their socio-economic characteristics were investigated. Required data were collected through questionnaires and interviews with 250 farmers in 2014. The study results showed that majority of the farmers belonged to the group with high level of risk averse; and among their effective socio-economic characteristics (including age, education, farm size, family size, agricultural income, percentage of income from farming, land ownership, farming experience and loan), the variables of agricultural income, percentage of income from farming and family size were positively and farm size and loan negatively correlated with the absolute degree of risk aversion of the farmers. Considering the high degree of risk aversion among majority of the studied farmers, the risk management would seem to be highly important. Therefore, a number of measures like common cultivation, product diversification and population control by the farmers themselves and strategies such as development of cooperatives, credit expansion, guaranteed prices, insurance and establishment and development of futures markets by policy makers were suggested.