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Decision-making under uncertainty and demand for insurance: an empirical study

Listed author(s):
  • Cristina OTTAVIANI


  • Daniela VANDONE


In this study we empirically estimated the role played by attitudes toward risk in insurance decision-making. To this end, we used the Iowa Gambling Task coupled with skin conductance recording, a validated experimental task of decision making under ambiguity which provides two dimensions of risk taking: the performance at the risk, as a measure of risk propensity, and the functioning of the somatic marker, as a measure of risk perception, that is the ability of the individual to “feel” the risk, independently of his/her risk attitude. The sample was made by 445 households and demographic-socio economical profiles were also obtained. Aside from confirming the role played by socio-economic explanatory variables, such as income level and marital status, on insurance purchase, results from the probit model showed the relevance of psychophysiological data: the likelihood of insurance demand is higher for people who are more risk seeking (worse performance at the task) but are adaptively able to feel the risk (anticipatory skin conductance responses to disadvantageous decks). Results are discussed in light of the need of interdisciplinary research.

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Paper provided by Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano in its series Departmental Working Papers with number 2011-05.

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Date of creation: 23 Feb 2011
Handle: RePEc:mil:wpdepa:2011-05
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