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Factors Widening the Gap between Hypothetical and Actual choices—Empirical Evidence from the Japanese Medical Insurance Market—

Author

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  • Fujii Yoichiro

    (School of Commerce, Meiji University, 1-1 Kanda-Surugadai, Chiyoda-kuTokyo 101-8301, Japan)

  • Inakura Noriko

    (Osaka School of International Public Policy, Osaka University, 1-31 Machikaneyama, ToyonakaOsaka 560-0043, Japan)

Abstract

This study examines the consistency in risk aversion between hypothetical and actual choices in medical insurance. Utilizing a unique survey in which individuals in Japan are asked about their perception of a hypothetical necessary amount for hospitalization benefits and the actual insurance contract amount at the time of hospitalization, the study identifies that the gap between the hypothetical and actual domains is not constant. Even between two similar domains of hospital benefits selection, the gap is found to vary depending on respondents’ anxiety about future medical expenses, their level of financial literacy, and other personal attributes such as age and occupation. The results of this study strongly suggest a need for exercising caution when using the degree of risk aversion obtained by hypothetical questions, questionnaire surveys, and experiments to predict actual behavior.

Suggested Citation

  • Fujii Yoichiro & Inakura Noriko, 2019. "Factors Widening the Gap between Hypothetical and Actual choices—Empirical Evidence from the Japanese Medical Insurance Market—," Asia-Pacific Journal of Risk and Insurance, De Gruyter, vol. 13(2), pages 1-15, July.
    • Handle: RePEc:bpj:apjrin:v:13:y:2019:i:2:p:15:n:2
    DOI: 10.1515/apjri-2018-0026
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    References listed on IDEAS

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    More about this item

    Keywords

    context-dependence; consistency in risk aversion; hospitalization benefit; financial literacy; hypothetical choice;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private

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