Valuation of Self-Insurance and Self-Protection under Ambiguity: Experimental Evidence
This experimental study, first, compares the individual valuations of two risk reduction mechanisms: self-insurance and self-protection. Second, it investigates these valuations when the loss amount is ambiguous, and compare these values with valuations when loss amounts are known. results confirm that there exists no "framing effect" due to the two risk reduction mechanisms. Ambiguity in the loss amount has a weak impact on the valuation, and using different representations of ambiguity does not change the valuation. Moreover, the mean ratios of ambiguous to risky bids are greater than one for low loss amounts indicating ambiguity aversion. These ratios are not significantly different from one for high loss amounts regardless of the probability of loss levels. Finally, 28 percent of the sample behaved consistent with the predictions of "anchoring and adjustment", while only 6 percent supported the "maximin" predictions.
|Date of creation:||06 Jul 2007|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +049 3641/ 9 43000
Fax: +049 3641/ 9 43000
Web page: http://www.jenecon.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dionne, Georges & Eeckhoudt, Louis, 1985.
"Self-insurance, self-protection and increased risk aversion,"
Elsevier, vol. 17(1-2), pages 39-42.
- Dionne, G. & Eeckhoudt, L., 1984. "Self-Insurance, Self-Protection and Increased Risk Aversion," Cahiers de recherche 8424, Universite de Montreal, Departement de sciences economiques.
- DIONNE, George & EECKHOUDT, Louis, . "Self-insurance, self-protection and increased risk aversion," CORE Discussion Papers RP -623, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Marcel Boyer & Georges Dionne, 1983. "Variations in the Probability and Magnitude of Loss: Their Impact on Risk," Canadian Journal of Economics, Canadian Economics Association, vol. 16(3), pages 411-19, August.
- Hogarth, Robin M & Kunreuther, Howard, 1989. " Risk, Ambiguity, and Insurance," Journal of Risk and Uncertainty, Springer, vol. 2(1), pages 5-35, April.
- Di Mauro, Carmela & Maffioletti, Anna, 1996. "An Experimental Investigation of the Impact of Ambiguity on the Valuation of Self-Insurance and Self-Protection," Journal of Risk and Uncertainty, Springer, vol. 13(1), pages 53-71, July.
- Ho, Joanna L Y & Keller, L Robin & Keltyka, Pamela, 2002. " Effects of Outcome and Probabilistic Ambiguity on Managerial Choices," Journal of Risk and Uncertainty, Springer, vol. 24(1), pages 47-74, January.
- Einhorn, Hillel J & Hogarth, Robin M, 1986. "Decision Making under Ambiguity," The Journal of Business, University of Chicago Press, vol. 59(4), pages S225-50, October.
- Carmela Di Mauro & Anna Maffioletti, . "The Impact of Ambiguity on the Valuation of Self-Insurance and Self-Protection," Discussion Papers 94/25, Department of Economics, University of York.
- Eric Briys & Harris Schlesinger & J.-Matthias Graf v. d. Schulenburg, 1991. "Reliability of Risk Management: Market Insurance, Self-Insurance and Self-Protection Reconsidered," The Geneva Risk and Insurance Review, Palgrave Macmillan, vol. 16(1), pages 45-58, June.
- Camerer, Colin & Kunreuther, Howard, 1989. " Experimental Markets for Insurance," Journal of Risk and Uncertainty, Springer, vol. 2(3), pages 265-99, September.
- Hogarth, Robin M & Kunreuther, Howard, 1985. "Ambiguity and Insurance Decisions," American Economic Review, American Economic Association, vol. 75(2), pages 386-90, May.
- Carmela Di Mauro & Anna Maffioletti, 2004. "Attitudes to risk and attitudes to uncertainty: experimental evidence," Applied Economics, Taylor & Francis Journals, vol. 36(4), pages 357-372.
- Giovanni Immordino, 2000. "Self-Protection, Information and the Precautionary Principle," The Geneva Risk and Insurance Review, Palgrave Macmillan, vol. 25(2), pages 179-187, December.
- Robin M. Hogarth & Hillel J. Einhorn, 1990. "Venture Theory: A Model of Decision Weights," Management Science, INFORMS, vol. 36(7), pages 780-803, July.
- Kangoh Lee, 2005. "Wealth Effects on Self-Insurance and Self-Protection against Monetary and Nonmonetary Losses," The Geneva Papers on Risk and Insurance Theory, Springer, vol. 30(2), pages 147-159, December.
- Kunreuther, Howard & Meszaros, Jacqueline & Hogarth, Robin M. & Spranca, Mark, 1995. "Ambiguity and underwriter decision processes," Journal of Economic Behavior & Organization, Elsevier, vol. 26(3), pages 337-352, May.
- Christophe Courbage, 2001. "Self-Insurance, Self-Protection and Market Insurance within the Dual Theory of Choice," The Geneva Risk and Insurance Review, Palgrave Macmillan, vol. 26(1), pages 43-56, June.
- Kuhn, Kristine M. & Budescu, David V., 1996. "The Relative Importance of Probabilities, Outcomes, and Vagueness in Hazard Risk Decisions," Organizational Behavior and Human Decision Processes, Elsevier, vol. 68(3), pages 301-317, December.
- Tversky, Amos & Kahneman, Daniel, 1992. " Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
- Shapira, Zur, 1993. " Ambiguity and Risk Taking in Organizations," Journal of Risk and Uncertainty, Springer, vol. 7(1), pages 89-94, August.
- Ehrlich, Isaac & Becker, Gary S, 1972. "Market Insurance, Self-Insurance, and Self-Protection," Journal of Political Economy, University of Chicago Press, vol. 80(4), pages 623-48, July-Aug..
- Schoemaker, Paul J. H., 1991. "Choices involving uncertain probabilities : Tests of generalized utility models," Journal of Economic Behavior & Organization, Elsevier, vol. 16(3), pages 295-317, December.
When requesting a correction, please mention this item's handle: RePEc:jrp:jrpwrp:2007-034. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Markus Pasche)
If references are entirely missing, you can add them using this form.