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Using Gambling to Teach Insurance Principles


  • Mark Pingle

    () (Department of Economics, University of Nevada, Reno)


A basic understanding of insurance principles is useful for making personal finance decisions and for considering public policy issues. Yet, insurance concepts tend to be less intuitive, more difficult for students to grasp, than other concepts. This paper shows how fundamental insurance principles can be taught by relating them to the principles underlying gambling, the game of roulette in particular. This approach has been used successfully with college freshmen taking macroeconomics at the University of Nevada, Reno. After hearing a lecture given using this approach, students tend to come alive with questions, can understand why they might not want to buy an extended warrantee the next time it is offered, can understand why investing in the stock market is usually different than gambling, and can even start to see the subtleties in public policy issues involving insurance.

Suggested Citation

  • Mark Pingle, 2010. "Using Gambling to Teach Insurance Principles," Working Papers 10-006, University of Nevada, Reno, Department of Economics;University of Nevada, Reno , Department of Resource Economics.
  • Handle: RePEc:unr:wpaper:10-006

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    References listed on IDEAS

    1. Chen, Zhiqi & Ross, Thomas W., 1994. "Why are extended warranties so expensive?," Economics Letters, Elsevier, vol. 45(2), pages 253-257, June.
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    More about this item


    Agnosticism; Gambling; Insurance; Teaching; Expected value; Risk averse; Risk seeking; Moral hazard; Adverse selection; Extended warrantee;

    JEL classification:

    • C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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