Estimating Risk Preferences Frrom Deductible Choice
Author | : Alma Cohen |
Publisher | : |
Total Pages | : 63 |
Release | : 2005 |
Genre | : |
ISBN | : |
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Author | : Alma Cohen |
Publisher | : |
Total Pages | : 63 |
Release | : 2005 |
Genre | : |
ISBN | : |
Author | : Alma Cohen |
Publisher | : |
Total Pages | : 63 |
Release | : 2005 |
Genre | : Automobile insurance |
ISBN | : |
"We use a large data set of deductible choices in auto insurance contracts to estimate the distribution of risk preferences in our sample. To do so, we develop a structural econometric model, which accounts for adverse selection by allowing for unobserved heterogeneity in both risk (probability of an accident) and risk aversion. Ex-post claim information separately identifies the marginal distribution of risk, while the joint distribution of risk and risk aversion is identified by the deductible choice. We find that individuals in our sample have on average an estimated absolute risk aversion which is higher than other estimates found in the literature. Using annual income as a measure of wealth, we find an average two-digit coefficient of relative risk aversion. We also find that women tend to be more risk averse than men, that proxies for income and wealth are positively related to absolute risk aversion, that unobserved heterogeneity in risk preferences is higher relative to that of risk, and that unobserved risk is positively correlated with unobserved risk aversion. Finally, we use our results for counterfactual exercises that assess the profitability of insurance contracts under various assumptions"--National Bureau of Economic Research web site.
Author | : Levon Barseghyan |
Publisher | : |
Total Pages | : 40 |
Release | : 2012 |
Genre | : |
ISBN | : |
Author | : Glenn W. Harrison |
Publisher | : Emerald Group Publishing |
Total Pages | : 265 |
Release | : 2023-10-23 |
Genre | : Business & Economics |
ISBN | : 1837972680 |
Models of Risk Preferences collects studies that critically review alternatives to Expected Utility Theory from the perspective of experimental economics.
Author | : Adam Sanoé Booij |
Publisher | : Rozenberg Publishers |
Total Pages | : 174 |
Release | : 2009 |
Genre | : |
ISBN | : 9036101190 |
Author | : Alan J. Auerbach |
Publisher | : Newnes |
Total Pages | : 497 |
Release | : 2013-06-24 |
Genre | : Business & Economics |
ISBN | : 0444537600 |
In the Handbook of Public Economics, vol. 5, top scholars provide context and order to new research about mechanisms that underlie both public finance theories and applications. These fundamental subjects follow the recent, steady movement away from rational decision-making and toward more personalized approaches to tax generation and expenditure, especially in terms of the use of psychological methods and financial incentives. Closely scrutinized subjects include new research in empirical (instead of theoretical) public finance, the methods for measuring taxes (both in revenue generation and expenditure), and the roles that taxes play in specific settings, such as emerging economies, urban settings, charitable giving, and among political entities (cities, counties, states, countries). Contributors look at both the "tax" and "expenditure" sides of public finance, emphasizing recent influences that psychology and philosophy have exerted in economics with articles on behavioral finance, charitable giving, and dynamic taxation. To a field enjoying rapid growth, their articles bring context and order, illuminating the mechanisms that underlie both public finance theories and applications. Editor Raj Chetty is the recipient of the 2013 John Bates Clark Medal from the American Economic Association Focuses on new approaches to both revenue generation and expenditures in public finance Presents coherent summaries of subjects in public economics that stretch from methodologies to applications Makes details about public economics accessible to scholars in fields outside economics
Author | : Daniel Friedman |
Publisher | : Routledge |
Total Pages | : 152 |
Release | : 2014-02-05 |
Genre | : Business & Economics |
ISBN | : 1317821246 |
For several decades, the orthodox economics approach to understanding choice under risk has been to assume that each individual person maximizes some sort of personal utility function defined over purchasing power. This new volume contests that even the best wisdom from the orthodox theory has not yet been able to do better than supposedly naïve models that use rules of thumb, or that focus on the consumption possibilities and economic constraints facing the individual. The authors assert this by first revisiting the origins of orthodox theory. They then recount decades of failed attempts to obtain meaningful empirical validation or calibration of the theory. Estimated shapes and parameters of the "curves" have varied erratically from domain to domain (e.g., individual choice versus aggregate behavior), from context to context, from one elicitation mechanism to another, and even from the same individual at different time periods, sometimes just minutes apart. This book proposes the return to a simpler sort of scientific theory of risky choice, one that focuses not upon unobservable curves but rather upon the potentially observable opportunities and constraints facing decision makers. It argues that such an opportunities-based model offers superior possibilities for scientific advancement. At the very least, linear utility – in the presence of constraints - is a useful bar for the "curved" alternatives to clear.
Author | : Levon Barseghyan |
Publisher | : |
Total Pages | : 0 |
Release | : 2014 |
Genre | : |
ISBN | : |
Using a unique data set, we test whether households' deductible choices in auto and home insurance reflect stable risk preferences. Our test relies on a structural model that assumes households are objective expected utility maximizers and claims are generated by household-coverage specific Poisson processes. We find that the hypothesis of stable risk preferences is rejected by the data. Our analysis suggests that many households exhibit greater risk aversion in their home deductible choices than their auto deductible choices. We find that our results are robust to several alternative modeling assumptions.
Author | : Skidmore, Mark |
Publisher | : Edward Elgar Publishing |
Total Pages | : 515 |
Release | : 2022-10-13 |
Genre | : Social Science |
ISBN | : 1839103736 |
Evaluating the myriad dimensions of how disasters can affect economic activity and decision-making, this cutting-edge Handbook presents a timely analysis of the conditions that reduce or exacerbate disaster impacts. Addressing developments in research on disaster economics, internationally recognized scholars combine theoretical considerations with empirical methods to expand and improve the field of disaster mitigation.
Author | : V. K. Smith |
Publisher | : Edward Elgar Publishing |
Total Pages | : 393 |
Release | : 2022-12-13 |
Genre | : Business & Economics |
ISBN | : 103530161X |
Featuring real world examples of how risk information affects public choices, The Economics of Environmental Risk expertly demonstrates that policymakers need to consider how people learn about those risks. Offering insights into examples such as hazardous waste, radon, smoking, hurricanes and terrorist threats over the past four decades, this intuitive book illustrates environmental risks and the choices made to mitigate the potential effects.