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Black Swan Protection: an Experimental Investigation

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  • Ozlem Ozdemir

    ()
    (Middle East Technical University, Department of Business Administration, Ankara, Turkey)

  • Andrea Morone

    ()
    (Università degli Studi di Bari, Aldo Moro Dipartimento di Studi Aziendali e Giusprivatistici, Bari, Italy and LEE-Economics Department, Universitat Jaume I, Castellón, Spain)

Abstract

This experimental study investigates insurance decisions in low-probability, high-loss risk situations. Results indicate that subjects consider the probability of loss (loss size) when they make buying decisions (paying decisions). Most individuals are risk averse with no specific threshold probability.

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File URL: http://www.doctreballeco.uji.es/wpficheros/ozdemir_morone_2012.pdf
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Bibliographic Info

Paper provided by Economics Department, Universitat Jaume I, Castellón (Spain) in its series Working Papers with number 2012/12.

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Length: 25 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:jau:wpaper:2012/12

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Keywords: Black swan; Risk; Insurance; Low probability; High loss; Experiment;

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  10. Andrea Morone & Ozlem Ozdemir, 2012. "Displaying Uncertain Information About Probability: Experimental Evidence," Bulletin of Economic Research, Wiley Blackwell, vol. 64(2), pages 157-171, 04.
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  14. John D Hey & Andrea Morone & Ulrich Schmidt, 2007. "Noise and Bias in Eliciting Preferences," Discussion Papers 07/04, Department of Economics, University of York.
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  18. Meroz, Yael & Morone, Andrea & Morone, Piergiuseppe, 2009. "Eliciting environmental preferences of Ghanaians in the laboratory: An incentive-compatible experiment," MPRA Paper 17107, University Library of Munich, Germany.
  19. John Hey & Jinkwon Lee, 2005. "Do Subjects Separate (or Are They Sophisticated)?," Experimental Economics, Springer, vol. 8(3), pages 233-265, September.
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  23. Camacho-Cuena, Eva & Seidl, Christian & Morone, Andrea, 2005. "Comparing preference reversal for general lotteries and income distributions," Journal of Economic Psychology, Elsevier, vol. 26(5), pages 682-710, October.
  24. Christian Seidl & Stefan Traub & Andrea Morone, 2004. "Relative Deprivation, Personal Income Satisfaction, and Average Well-Being under Different Income Distributions," Experimental 0401004, EconWPA.
  25. Machina, Mark J & Pratt, John W, 1997. "Increasing Risk: Some Direct Constructions," Journal of Risk and Uncertainty, Springer, vol. 14(2), pages 103-27, March.
  26. Colin F. Camerer & Howard Kunreuther, 1989. "Decision processes for low probability events: Policy implications," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 8(4), pages 565-592.
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