The costs of betrayal aversion: The case of vanilla production in Madagascar∗

 Marcela Ibanez, Gerhard Riener and Viviana Urueña

This paper provides field evidence on betrayal aversion among farmers in rural Madagascar. We show that about 30 percent of the farmers avoid risk more when a person rather than nature determines the outcome. However, we also identify a substantial degree of betrayal neutral and betrayal loving behavior. Betrayal aversion is associated with lower investments in vanilla production, particularly in areas with high criminality. Our findings show the importance of implementing initiatives that aim at reducing crime.