Arbeitspapier
Insurance demand and prospect theory
Empirical evidence has shown that people are unwilling to insure rare losses at subsidized premiums and at the same time take-up insurance for moderate risks at highly loaded premiums. This paper explores whether prospect theory, in particular diminishing sensitivity and loss aversion, can accommodate this evidence. A crucial factor for applying prospect theory to insurance problems is the choice of the reference point. We motivate and explore two possible reference points, state-dependent initial wealth and final wealth after buying full insurance. It turns out that particularly the latter reference point seems to provide a realistic explanation of the empirical evidence.
- Sprache
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Englisch
- Erschienen in
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Series: Kiel Working Paper ; No. 1750
- Klassifikation
-
Wirtschaft
Household Saving; Personal Finance
Criteria for Decision-Making under Risk and Uncertainty
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- Thema
-
insurance demand
prospect theory
flood insurance
diminishing sensitivity
loss aversion
Elementarschadenversicherung
Konsumentenverhalten
Prospect Theory
Theorie
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Schmidt, Ulrich
- Ereignis
-
Veröffentlichung
- (wer)
-
Kiel Institute for the World Economy (IfW)
- (wo)
-
Kiel
- (wann)
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2012
- Handle
- Letzte Aktualisierung
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10.03.2025, 11:41 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Schmidt, Ulrich
- Kiel Institute for the World Economy (IfW)
Entstanden
- 2012