Insurance demand and social comparison: An experimental analysis

Journal article
(Original article)


Publication Details

Author(s): Friedl A, Lima de Miranda K, Schmidt U
Journal: Journal of Risk and Uncertainty
Publication year: 2014
Volume: 48
Journal issue: 2
Pages range: 97–109
ISSN: 0895-5646
Language: English


Abstract


This paper analyzes whether social comparison can explain the low take-up of disaster insurance usually reported in field studies. We argue that risks in the case of disasters are highly correlated between subjects whereas risks for which high insurance take-up can be observed (e.g. extended warranties or cell phone insurance) are typically idiosyncratic. We set up a simple model with social reference points and show that in the presence of inequality aversion social comparison makes insurance indeed less attractive if risks are correlated. In addition we conducted a simple experiment which confirms these theoretical results. The average willingness to pay for insurance is significantly higher for idiosyncratic than for correlated risks.



FAU Authors / FAU Editors

Friedl, Andreas
Lehrstuhl für Volkswirtschaftslehre, insbesondere Wirtschaftstheorie


How to cite

APA:
Friedl, A., Lima de Miranda, K., & Schmidt, U. (2014). Insurance demand and social comparison: An experimental analysis. Journal of Risk and Uncertainty, 48(2), 97–109. https://dx.doi.org/10.1007/s11166-014-9189-9

MLA:
Friedl, Andreas, Katharina Lima de Miranda, and Ulrich Schmidt. "Insurance demand and social comparison: An experimental analysis." Journal of Risk and Uncertainty 48.2 (2014): 97–109.

BibTeX: 

Last updated on 2018-19-04 at 04:30