Understanding of Compound Risk and Investment Decisions

Last registered on April 06, 2026

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Pre-Trial

Trial Information

General Information

Title

Understanding of Compound Risk and Investment Decisions

RCT ID

AEARCTR-0018255

Initial registration date

March 31, 2026

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published

April 06, 2026, 7:55 AM EDT

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Locations

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Primary Investigator

Name

Lotte van der Haar

Affiliation

Wageningen University & Research

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Other Primary Investigator(s)

PI Name

Karlijn Morsink

PI Affiliation

Utrecht University School of Economics

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PI Name

Kelvin Shikuku

PI Affiliation

International Livestock Research Centre

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Additional Trial Information

Status

On going

Start date

2025-11-24

End date

2027-04-01

Keywords

Behavior, Other

Additional Keywords

JEL code(s)

Secondary IDs

Prior work

This trial does not extend or rely on any prior RCTs.

Abstract

This study aims to answer how individuals' understanding of compound risks, as opposed to preferences over compound risks, impacts investment behavior. We study this question using a lab-in-the-field experiment among a sample of 3143 pastoral household heads in Kenya and Ethiopia. We randomly vary the provision of a decision aid that helps individuals with processing compound risks and test the effects on investment decisions in an investment task.

External Link(s)

Registration Citation

Citation

Morsink, Karlijn, Kelvin Shikuku and Lotte van der Haar. 2026. "Understanding of Compound Risk and Investment Decisions." AEA RCT Registry. April 06. https://doi.org/10.1257/rct.18255-1.0

Sponsors & Partners

Experimental Details

Interventions

Intervention(s)

Intervention Start Date

2025-11-24

Intervention End Date

2025-12-30

Primary Outcomes

Primary Outcomes (end points)

- Investment behavior in investment task (see PAP)
- Reaction time

Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)

Secondary Outcomes (explanation)

Experimental Design

The experimental design consists of a short lab-in-the-field experiment with two experimental arms, randomized at the household level:
1. Compound framing only (control)
2. Compound framing + Decision aid
In both arms, participants face an investment task involving compound risk. In the second arm, participants also receive a decision aid that supports the processing of compound risk. Because the way the compound risk is explained (the framing) may also influence understanding, we cross-randomize two alternative framings: an abstract framing and an intuitive framing. The abstract framing describes compound risks using tokens, whereas the intuitive framing uses livestock.

Experimental Design Details

Not available

Randomization Method

The first two randomizations were conducted in Stata 18 and stratified by districts and unit area of insurance. The third randomization was pre-programmed in the survey data-collection tool and revealed to the respondent and enumerator after the tasks were completed.

Randomization Unit

The project includes three household-level randomizations: (1) Randomization of version and cross-randomization of the framing of the lab-in-the-field task, (2) Randomization of order of the two investment tasks to measure compound risk ability and simple risk ability, (3) Randomization of selection for payment and of the task to be incentivized.

Was the treatment clustered?