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Willingness to Pay for Firm Reputation: Paying for Risk Rating in the Annuity Market

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  • Alcalde, Pilar
  • Vial, Bernardita

Abstract

In this paper we test the existence of a reputation premium in the context of the annuity market in Chile. This market provides an exceptionally good setting to measure consumers’ willingness to pay: retirees choose between a set of offers that vary only in the quote and the risk rating –a measure of the firm’s solvency– within each class of product. We find that willingness to pay for the reputation linked to the firm’s risk rating is statistically and economically significant. We also find a strong relationship between willingness to pay and intermediary choice, and we explore four potential sources of correlation between them.

Suggested Citation

  • Alcalde, Pilar & Vial, Bernardita, 2016. "Willingness to Pay for Firm Reputation: Paying for Risk Rating in the Annuity Market," MPRA Paper 68993, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:68993
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    References listed on IDEAS

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    Cited by:

    1. Gaurab Aryal & Eduardo Fajnzylber & Maria F. Gabrielli & Manuel Willington, 2020. "Auctioning Annuities," Papers 2011.02899, arXiv.org, revised Jun 2021.
      • Gaurab Aryal & Eduardo Fajnzylber & Maria F. Gabrielli & Manuel Willington, 2020. "Auctioning Annuities," Working Papers 29, Red Nacional de Investigadores en Economía (RedNIE).
    2. Cristian Escudero & José L. Ruiz, 2022. "Choosing the highest annuity payout: the role of intermediation and firm reputation," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 47(4), pages 973-1004, October.

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    More about this item

    Keywords

    reputation premium; willingness to pay; demand estimation; annuity markets;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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