Abstract
The Pasture, Rangeland and Forage Rainfall Index (PRF-RI) insurance program is a relatively new subsidized insurance product available to livestock and forage producers in the United States. Past research has shown that participants have made policy choices that tended to increase their basis risk, or the risk that insurance indemnities do not correlate with on-farm forage outcomes. Basis risk has been shown to decrease demand for index insurance products like PRF-RI. We conduct an incentive-compatible framed-field experiment with livestock and forage producers in the northeastern U.S. to investigate behavior and decision-making in the PRF-RI program. We explore two main research questions: 1) Does an informational nudge about basis risk increase enrollment in PRF-RI? 2) Does information about basis risk nudge participants to make PRF-RI policy decisions that reduce basis risk? Preliminary results suggest that the informational nudge regarding basis risk increases the decision to enroll in PRF-RI, but has no impact on the policy decisions related to basis risk.