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Worry and the illusion of safety: Evidence from a real-objects experiment

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  • Schade, Christian
  • Kunreuther, Howard

Abstract

We analyze the impact of an individual's tendency to worry on willingness to pay (WTP) for a protective measure. We report on the results of a controlled experiment with real objects at stake. Worry was measured with the Worry Domains Questionnaire, an instrument determining an individual's tendency to (non-pathological) worry. Although the loss probability was relatively high and exactly specified, we find that the tendency to worry has in general a positive effect on WTP for protective measures. However when the objects at stake are given to our respondents, high worriers significantly reduce their WTP for protection whereas low worriers are unaffected. We call this tendency of high worriers a safety illusion and relate it to findings on automatic self- regulation, transitional objects in childhood, and studies on the illusion of control. High worriers appear to make more use of all these mechanisms than low worriers because they have more experience in easing their anxiety.

Suggested Citation

  • Schade, Christian & Kunreuther, Howard, 2002. "Worry and the illusion of safety: Evidence from a real-objects experiment," SFB 373 Discussion Papers 2002,25, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    • Handle: RePEc:zbw:sfb373:200225
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    References listed on IDEAS

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    1. Hogarth, Robin M & Kunreuther, Howard, 1995. "Decision Making under Ignorance: Arguing with Yourself," Journal of Risk and Uncertainty, Springer, vol. 10(1), pages 15-36, January.
    2. Richard H. Thaler, 2008. "Mental Accounting and Consumer Choice," Marketing Science, INFORMS, vol. 27(1), pages 15-25, 01-02.
    3. Johnson, Eric J & Hershey, John & Meszaros, Jacqueline & Kunreuther, Howard, 1993. "Framing, Probability Distortions, and Insurance Decisions," Journal of Risk and Uncertainty, Springer, vol. 7(1), pages 35-51, August.
    4. McClelland, Gary H & Schulze, William D & Coursey, Don L, 1993. "Insurance for Low-Probability Hazards: A Bimodal Response to Unlikely Events," Journal of Risk and Uncertainty, Springer, vol. 7(1), pages 95-116, August.
    5. Hsee, Christopher K & Kunreuther, Howard C, 2000. "The Affection Effect in Insurance Decisions," Journal of Risk and Uncertainty, Springer, vol. 20(2), pages 141-159, March.
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    Cited by:

    1. Schade, Christian & Kunreuther, Howard & Kaas, Klaus Peter, 2002. "Low-probability insurance decisions: The role of concern," SFB 373 Discussion Papers 2002,23, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    2. Levesque, Moren & Schade, Christian, 2005. "Intuitive optimizing: experimental findings on time allocation decisions with newly formed ventures," Journal of Business Venturing, Elsevier, vol. 20(3), pages 313-342, May.
    3. Bernadette Kamleitner & Erich Kirchler, 2006. "Personal loan users’ mental integration of payment and consumption," Marketing Letters, Springer, vol. 17(4), pages 281-294, December.

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