Stepping stone or stumbling block: Anchoring effect of crop insurance subsidies

Abstract This study examines how the anchoring effect created by long‐term high premium subsidies leads to irrational crop insurance purchasing behavior among farmers. Using a randomized controlled trial, we show that the insurance experience of low premium generates an intrinsic anchoring effect and inhibits farmers' willingness to pay for new crop insurance through two main channels: price and perception. At the same time, farmers with small crop scale, limited disaster experience, and a diverse income structure are more susceptible to intrinsic anchoring impacts. In addition, the results suggest that the anchoring effect of high premium subsidies on farmers is difficult to change. This distortion of value perceptions counteracts the potential external anchoring effect of favorable information and further inhibits farmers' willingness to pay.