Buying Insurance for Disaster-Type Risks: Experimental Evidence
AbstractThis paper presents a series of experiments that confront subjects with low probability, high loss situations. A rich parameter set is examined and we find subjects respond to low probability, high loss risks in predictable ways. As loss events become more likely, or loss amounts get larger, or the cost of insurance falls, subjects are more likely to buy indemnifying insurance, even for the class of low probability risks that usually presents problems for standard expected utility theory. A novel application of Cameron's method to estimate willingness to pay from dichotomous choice responses allows us to estimate willingness to pay for insurance. We do not observe the bimodal distribution of bids found in other studies of similar risk situations. Copyright 2000 by Kluwer Academic Publishers
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Springer in its journal Journal of Risk and Uncertainty.
Volume (Year): 20 (2000)
Issue (Month): 3 (May)
Contact details of provider:
Web page: http://www.springerlink.com/link.asp?id=100299
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Keser, Claudia & Montmarquette, Claude, 2008.
"Voluntary contributions to reduce expected public losses,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 66(3-4), pages 477-491, June.
- Claudia Keser & Claude Montmarquette, 2002. "Voluntary Contributions to Reduce Expected Public Losses," CIRANO Working Papers 2002s-60, CIRANO.
- Ulrich Schmidt, 2012. "Insurance Demand and Prospect Theory," Kiel Working Papers 1750, Kiel Institute for the World Economy.
- Michèle Cohen & Johanna Etner & Meglena Jeleva, 2008.
"Dynamic Decision Making when Risk Perception Depends on Past Experience,"
Theory and Decision,
Springer, vol. 64(2), pages 173-192, March.
- Michèle Cohen & Johanna Etner & Meglena Jeleva, 2008. "Dynamic Decision Making when Risk Perception Depends on Past Experience," UniversitÃ© Paris1 PanthÃ©on-Sorbonne (Post-Print and Working Papers) halshs-00211942, HAL.
- M.A.P.M. van Asseldonk & H.B. van der Veen & H.A.B. van der Meulen, 2010. "Retirement planning by Dutch farmers: rationality or randomness?," Agricultural Finance Review, Emerald Group Publishing, vol. 70(3), pages 365-376, November.
- Andrea Morone & Ozlem Ozdemir, 2006. "Valuing Protection against Low Probability, High Loss Risks: Experimental Evidence," Papers on Strategic Interaction 2006-34, Max Planck Institute of Economics, Strategic Interaction Group.
- Ogurtsov, Victor A. & Van Asseldonk, Marcel A.P.M. & Huirne, Ruud B.M., 2006. "Factors Explaining Farmers' Insurance Purchase in the Dutch Dairy Sector," 99th Seminar, February 8-10, 2006, Bonn, Germany 7774, European Association of Agricultural Economists.
- Erwann Michel-Kerjan & Paul A. Raschky & Howard C. Kunreuther, 2009.
"Corporate Demand for Insurance: An Empirical Analysis of the U.S. Market for Catastrophe and Non-Catastrophe Risks,"
2009-10, Faculty of Economics and Statistics, University of Innsbruck.
- Erwann Michel-Kerjan & Paul A. Raschky & Howard C. Kunreuther, 2009. "Corporate Demand for Insurance: An Empirical Analysis of the U.S. Market for Catastrophe and Non-Catastrophe Risks," Working Papers hal-00372420, HAL.
- Erwann Michel-Kerjan & Paul Raschky & Howard Kunreuther, 2011. "Corporate Demand for Insurance: An Empirical Analysis of the U.S. Market for Catastrophe and Non-Catastrophe Risks," NBER Working Papers 17403, National Bureau of Economic Research, Inc.
- Brunette, Marielle & Couture, Stéphane, 2008. "Public compensation for windstorm damage reduces incentives for risk management investments," Forest Policy and Economics, Elsevier, vol. 10(7-8), pages 491-499, October.
- Susan K. Laury & Melayne Morgan McInnes & J. Todd Swarthout, 2008. "Insurance Purchase for Low-Probability Losses," Experimental Economics Center Working Paper Series 2008-03, Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University, revised Oct 2008.
- John C. Whitehead, 2006. "Willingness to Pay for Low Probability, Low Loss Hazard Insurance," Working Papers 06-08, Department of Economics, Appalachian State University.
- Marielle Brunette & Laure Cabantous & Stéphane Couture & Anne Stenger, 2008. "Insurance Demand for Disaster-type Risks and the Separation of Attitudes toward Risk and Ambiguity: an Experimental Study," Working Papers - Cahiers du LEF 2008-05, Laboratoire d'Economie Forestiere, AgroParisTech-INRA.
- Wenzel, Lars & Wolf, André, 2013. "Protection against major catastrophes: An economic perspective," HWWI Research Papers 137, Hamburg Institute of International Economics (HWWI).
- Marielle Brunette & Stephane Couture, 2007. "Effects of Public Compensation for Disaster Damages on Private Insurance and Forest Management Decisions," Working Papers - Cahiers du LEF 2007-06, Laboratoire d'Economie Forestiere, AgroParisTech-INRA.
- Susan Laury & Melayne McInnes & J. Swarthout, 2009. "Insurance decisions for low-probability losses," Journal of Risk and Uncertainty, Springer, vol. 39(1), pages 17-44, August.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn) or (Christopher F. Baum).
If references are entirely missing, you can add them using this form.