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Framing, Probability Distortions, and Insurance Decisions

In: Making Decisions About Liability And Insurance

Author

Listed:
  • Eric J. Johnson

    (University of Pennsylvania, The Wharton School, Marketing Department)

  • John Hershey

    (University of Pennsylvania, The Wharton School, Department of Operations and Information Management)

  • Jacqueline Meszaros

    (Temple University, School of Business and Management, Department of General and Strategic Management)

  • Howard Kunreuther

    (University of Pennsylvania, The Wharton School, Department of Operations and Information Management)

Abstract

A series of studies examines whether certain biases in probability assessments and perceptions of loss, previously found in experimental studies, affect consumers’ decisions about insurance. Framing manipulations lead the consumers studied here to make hypothetical insurance-purchase choices that violate basic laws of probability and value. Subjects exhibit distortions in their perception of risk and framing effects in evaluating premiums and benefits. Illustrations from insurance markets suggest that the same effects occur when consumers make actual insurance purchases.

Suggested Citation

  • Eric J. Johnson & John Hershey & Jacqueline Meszaros & Howard Kunreuther, 1993. "Framing, Probability Distortions, and Insurance Decisions," Springer Books, in: Colin Camerer & Howard Kunreuther (ed.), Making Decisions About Liability And Insurance, pages 35-51, Springer.
    • Handle: RePEc:spr:sprchp:978-94-011-2192-7_3
    DOI: 10.1007/978-94-011-2192-7_3
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