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The impact of governmental assistance on insurance demand under ambiguity: a theoretical model and an experimental test

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  • Marielle Brunette

    ()

  • Laure Cabantous

    ()

  • Stéphane Couture

    ()

  • Anne Stenger

    ()

Abstract

This article deals with the impact of governmental assistance on insurance demand under ambiguity, i.e., in situations where probabilities are uncertain. First, using a model of insurance demand under ambiguity, we derive theoretical predictions about the impact of several governmental assistance programmes on optimal insurance demand. For example, governmental assistance through a fixed public support scheme implies that partial insurance is always optimal under fair insurance with ambiguity. Second, we present the results of an experiment designed to test these predictions. We find support for several of our theoretical predictions. For example, the presence of governmental assistance through a fixed public support scheme decreases individuals’ willingness to pay to be fully insured. Finally, we compare these results with those obtained for a risk situation. We find that, regardless of the form of governmental assistance, participants in the ambiguity context are consistently willing to pay more to be fully insured than participants in the risk situation. Copyright Springer Science+Business Media New York 2013

Suggested Citation

  • Marielle Brunette & Laure Cabantous & Stéphane Couture & Anne Stenger, 2013. "The impact of governmental assistance on insurance demand under ambiguity: a theoretical model and an experimental test," Theory and Decision, Springer, vol. 75(2), pages 153-174, August.
  • Handle: RePEc:kap:theord:v:75:y:2013:i:2:p:153-174
    DOI: 10.1007/s11238-012-9321-8
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Andor, Mark & Osberghaus, Daniel & Simora, Michael, 2017. "Natural disasters and governmental aid: Is there a charity hazard?," ZEW Discussion Papers 17-065, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    2. Michael Berlemann & Max Steinhardt & Jascha Tutt, 2015. "Do Natural Disasters Stimulate Individual Saving? Evidence from a Natural Experiment in a Highly Developed Country," SOEPpapers on Multidisciplinary Panel Data Research 763, DIW Berlin, The German Socio-Economic Panel (SOEP).
    3. Goeschl, Timo & Managi, Shunsuke, 2017. "Public in-kind relief and private self-insurance," Working Papers 0633, University of Heidelberg, Department of Economics.
    4. Johannes G. Jaspersen, 2016. "Hypothetical Surveys And Experimental Studies Of Insurance Demand: A Review," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 83(1), pages 217-255, January.
    5. repec:eee:pubeco:v:149:y:2017:i:c:p:47-58 is not listed on IDEAS
    6. Thornton, Philip K. & Lipper, Leslie, 2014. "How does climate change alter agricultural strategies to support food security?:," IFPRI discussion papers 1340, International Food Policy Research Institute (IFPRI).
    7. repec:eee:jeeman:v:87:y:2018:i:c:p:150-164 is not listed on IDEAS
    8. Sauter, Philipp A. & Möllmann, Torsten B. & Anastassiadis, Friederike & Mußhoff, Oliver & Möhring, Bernhard, 2016. "To insure or not to insure? Analysis of foresters' willingness-to-pay for fire and storm insurance," Forest Policy and Economics, Elsevier, vol. 73(C), pages 78-89.
    9. Brunette, M. & Holecy, J. & Sedliak, M. & Tucek, J. & Hanewinkel, M., 2015. "An actuarial model of forest insurance against multiple natural hazards in fir (Abies Alba Mill.) stands in Slovakia," Forest Policy and Economics, Elsevier, vol. 55(C), pages 46-57.
    10. Qin, Tao & Gu, Xuesong & Tian, Zhiwei & Pan, Huanxue & Deng, Jing & Wan, Li, 2016. "An empirical analysis of the factors influencing farmer demand for forest insurance: Based on surveys from Lin’an County in Zhejiang Province of China," Journal of Forest Economics, Elsevier, vol. 24(C), pages 37-51.

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