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Behavioral foundations of the substitutability between insurance and self-insurance: An experimental study

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  • François Pannequin
  • Anne Corcos
  • Claude Montmarquette

Abstract

In this experimental study, the analysis on two levels of substitution between insurance and self-insurance shows that a higher unit price results in a quantity-based substitution and a between-tools substitution while the only effect of a higher fixed cost is to reduce the insurance market. The optimality of the coverage demands associated with the equalization of marginal returns is not achieved. Instead, individuals chose a stable global amount of coverage. These behavioral insights have a potential impact on public policies related to insurance and self-insurance.

Suggested Citation

  • François Pannequin & Anne Corcos & Claude Montmarquette, 2016. "Behavioral foundations of the substitutability between insurance and self-insurance: An experimental study," CIRANO Working Papers 2016s-12, CIRANO.
    • Handle: RePEc:cir:cirwor:2016s-12
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    File URL: https://cirano.qc.ca/files/publications/2016s-12.pdf
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    References listed on IDEAS

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    Cited by:

    1. Sarah Bensalem, 2020. "Self-insurance and Non-concave Distortion Risk Measures," Working Papers hal-02936349, HAL.

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    Keywords

    insurance; self-insurance; substitutability; lab experiment; risk-aversion;
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