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Using the self-stated degree of risk aversion regarding health from the GSOEP we find some evidence for risk aversion being a source of advantageous selection. Risk averse men more often procure supplementary insurance for hospital visits despite needing the additional coverage less.
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In this paper, we consider a population of individuals who differ in two dimensions: their risk type (expected loss) and their risk aversion. We solve for the profit maximizing menu of contracts that a monopolistic insurer puts out on the market. First, we find that it is never optimal to fully...
Persistent link: https://www.econbiz.de/10014175067
We estimate the distribution of risk preferences using a large data set of deductible choices in auto insurance contracts. To do so, we develop a structural econometric model of adverse selection that allows for unobserved heterogeneity in both risk (claim rate) and risk aversion. We use data on...
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The endowment effect, status quo bias, and loss aversion are robust and well documented results from experimental psychology. They introduce a wedge between the prices at which one is willing to sell or buy a good. The objective of this paper is to address this wedge. We show that the presence...
Persistent link: https://www.econbiz.de/10009724431
We consider a model of competitive insurance markets under asymmetric information with ambiguity-averse agents who maximize their maxmin expected utility. The interaction between asymmetric information and ambiguity aversion gives rise to some interesting results. First, for some parameter...
Persistent link: https://www.econbiz.de/10012904440
We consider a model of competitive insurance markets under asymmetric information with ambiguity-averse agents who maximize their maxmin expected utility. The interaction between asymmetric information and ambiguity aversion gives rise to some interesting results. First, for some parameter...
Persistent link: https://www.econbiz.de/10012905983
Telemonitoring devices can be used to screen consumers' characteristics and mitigate information asymmetries that lead to adverse selection in insurance markets. However, some consumers value their privacy and dislike sharing private information with insurers. In the second-best efficient...
Persistent link: https://www.econbiz.de/10011724373
This article examines adverse selection in insurance markets within a two-dimensional information framework, where policyholders differ in both their riskiness and degree of risk aversion. Using this setup, we first build a theoretical model to make equilibrium predictions on competitive...
Persistent link: https://www.econbiz.de/10014185759