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The context effect in the choice of earthquake insurance contracts in Japan

  • SATO, Motohiro
  • SAITO, Makoto

In this paper, we investigate the context effect in the choice of public and private earthquake insurance contracts using data from a questionnaire survey completed by an identical set of approximately 2,000 households in 2008 and again in 2009. According to the 2008 survey, the public earthquake insurance (PEI) was not popular among those who felt that the premiums were too high. On the other hand, the 2009 survey demonstrates that the choice of earthquake insurance changed substantially when a hypothetical private earthquake insurance contract, much more expensive than the PEI, was added to a choice menu. In particular, those who had initially felt that PEI was too expensive tended to find it less expensive relative to private insurance, and worth purchasing. A crucial advantage of the above choice architecture is that including additional options helps private insurance companies to develop market activities.

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File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/19331/1/070econDP11-10.pdf
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Paper provided by Graduate School of Economics, Hitotsubashi University in its series Discussion Papers with number 2011-10.

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Length: 42 p.
Date of creation: Sep 2011
Date of revision:
Handle: RePEc:hit:econdp:2011-10
Contact details of provider: Phone: +81-42-580-8000
Web page: http://www.econ.hit-u.ac.jp/
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  1. Barbos, Andrei, 2010. "Context effects: A representation of choices from categories," Journal of Economic Theory, Elsevier, vol. 145(3), pages 1224-1243, May.
  2. Bruce Ian Carlin & Simon Gervais & Gustavo Manso, 2009. "When Does Libertarian Paternalism Work?," NBER Working Papers 15139, National Bureau of Economic Research, Inc.
  3. Simonson, Itamar, 1989. " Choice Based on Reasons: The Case of Attraction and Compromise Effects," Journal of Consumer Research, University of Chicago Press, vol. 16(2), pages 158-74, September.
  4. Prelec, Drazen & Wernerfelt, Birger & Zettelmeyer, Florian, 1997. " The Role of Inference in Context Effects: Inferring What You Want from What Is Available," Journal of Consumer Research, University of Chicago Press, vol. 24(1), pages 118-25, June.
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