Insurance demand and social comparison: An experimental analysis
Friedl A, Lima de Miranda K, Schmidt U (2014)
Publication Language: English
Publication Type: Journal article, Original article
Publication year: 2014
Journal
Book Volume: 48
Pages Range: 97–109
Journal Issue: 2
URI: https://link.springer.com/content/pdf/10.1007%2Fs11166-014-9189-9.pdf
DOI: 10.1007/s11166-014-9189-9
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.
Authors with CRIS profile
Involved external institutions
Germany (DE)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: Download