This paper empirically studies the impact of consumer reaction to default risk on an insurer's optimal solvency level. Using experimentally obtained data, we derive a price-default risk-demand-curve that serves as an input variable for the insurer's risk strategy. We show that an insurer should...

This article is the first to conduct an incentive-compatible experiment using real monetary payoffs to test the hypothesis of probabilistic insurance, which states that willingness to pay for insurance decreases sharply in the presence of even small default probabilities as compared to a...

This paper is the first to conduct an incentive-compatible experiment using real monetary payoffs to test the hypothesis of probabilistic insurance which states that willingness to pay for insurance decreases sharply in the presence of even small default probabilities as compared to a risk-free...

The industrialized world experiences a demographic shift that is straining public pension systems. Employer-sponsored pension plans change from defined benefit to defined contribution. More emphasis is put on individually managed retirement funds. One concern with this movement is the potential...

Much of the industrialized world is undergoing a significant demographic shift, placing strain on public pension systems. Policymakers are responding with pension system reforms that put more weight on privately managed retirement funds. One concern with these changes is the effect on individual...