IDEAS home Printed from
   My bibliography  Save this article

Insurance for Low-Probability Hazards: A Bimodal Response to Unlikely Events


  • McClelland, Gary H
  • Schulze, William D
  • Coursey, Don L


Two insurance experiments using real-money consequences and multiple rounds to provide experience are described. In the first experiment, subjects bid for insurance to prevent a fixed loss of $4 at probabilities ranging from .01 to .9. Mean bids were near expected value except at the lowest probability of .01, for which a very bimodal distribution was observed (some subjects bid zero and others bid much more than expected value). A second experiment explored this bimodality at a probability of .01 with loss increased to $40. A similar bimodal distribution was obtained that persisted over 50 rounds of experience. These laboratory results are consistent with field evidence for low-probability hazards, for which people appear either to dismiss the risks or to worry too much about them. Copyright 1993 by Kluwer Academic Publishers

Suggested Citation

  • 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.
  • Handle: RePEc:kap:jrisku:v:7:y:1993:i:1:p:95-116

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:jrisku:v:7:y:1993:i:1:p:95-116. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla) or (Springer Nature Abstracting and Indexing). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.