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


Book Volume: 48

Pages Range: 97–109

Journal Issue: 2


DOI: 10.1007/s11166-014-9189-9


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.

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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.


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.

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