Risk aversion and demand uncertainty among small firms evidence from new product adoption
This working paper demonstrates that small retailers in Kenya are risk averse.
Abstract
This paper demonstrates that small retailers in Kenya are risk averse, leading them to under-adopt a new product when they face uncertain demand. The author models risk averse firms who learn about demand through stocking decisions, then tests the model’s predictions using two field experiments. Results show that risk aversion in firms can impede product diffusion, potentially limiting growth.
This paper is part of the Private Enterprise Development in Low-Income Countries (PEDL) programme.
Citation
Killeen G. ‘Risk aversion and demand uncertainty among small firms evidence from new product adoption’ PEDL Working Paper, 2025
Links
Risk aversion and demand uncertainty among small firms evidence from new product adoption