IDEAS home Printed from https://ideas.repec.org/h/spr/lnechp/978-3-642-22884-1_5.html
   My bibliography  Save this book chapter

An Econometric Model Based on the Maxmin Expected Utility Model: An Application to Earthquake Insurance

In: Managing Safety of Heterogeneous Systems

Author

Listed:
  • Toshio Fujimi

    (Kumamoto University)

  • Hirokazu Tatano

    (Kyoto University)

Abstract

This study empirically investigates the influence of ambiguity on consumers’ decision to buy a hypothetical earthquake insurance policy. Using survey data, it identifies effects of specific consumer characteristics on their decision based on the Maxmin Expected Utility (MEU) model. We develop an econometric model consistent with the MEU model derived from axioms. Our study provides three main results: First, respondents’ preferences for the insurance when faced with 1%, 5%, and 10% appraisal risk are generally inconsistent with expected utility theory. Second, respondents demanded more than a 10% reduction in insurance premium as compensation for accepting each tier of appraisal risk. Third, the required discount is greatest among men who had previously purchased earthquake insurance and had experienced earthquake damage to their houses, and the required discount increases with age and education.

Suggested Citation

  • Toshio Fujimi & Hirokazu Tatano, 2012. "An Econometric Model Based on the Maxmin Expected Utility Model: An Application to Earthquake Insurance," Lecture Notes in Economics and Mathematical Systems, in: Yuri Ermoliev & Marek Makowski & Kurt Marti (ed.), Managing Safety of Heterogeneous Systems, edition 127, pages 89-106, Springer.
    • Handle: RePEc:spr:lnechp:978-3-642-22884-1_5
    DOI: 10.1007/978-3-642-22884-1_5
    as

    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.

    Corrections

    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:spr:lnechp:978-3-642-22884-1_5. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    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 (email available below). General contact details of provider: http://www.springer.com .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.