Estimating Risk Preferences from Deductible Choice
Alma Cohen and
Liran Einav
American Economic Review, 2007, vol. 97, issue 3, 745-788
Abstract:
We develop a structural econometric model to estimate risk preferences from data on deductible choices in auto insurance contracts. We account for adverse selection by modeling unobserved heterogeneity in both risk (claim rate) and risk aversion. We find large and skewed heterogeneity in risk attitudes. In addition, women are more risk averse than men, risk aversion exhibits a U-shape with respect to age, and proxies for income and wealth are positively associated with absolute risk aversion. Finally, unobserved heterogeneity in risk aversion is greater than that of risk, and, as we illustrate, has important implications for insurance pricing. (JEL D81, G22)
Date: 2007
Note: DOI: 10.1257/aer.97.3.745
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (374)
Downloads: (external link)
http://www.aeaweb.org/articles.php?doi=10.1257/aer.97.3.745 (application/pdf)
http://www.aeaweb.org/aer/data/june07/20050644_data.zip (application/zip)
http://www.aeaweb.org/aer/data/june07/20050644_app.pdf (application/pdf)
Access to full text is restricted to AEA members and institutional subscribers.
Related works:
Working Paper: Estimating Risk Preferences from Deductible Choice (2005) 
Working Paper: Estimating Risk Preferences from Deductible Choice (2005) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:97:y:2007:i:3:p:745-788
Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions
Access Statistics for this article
American Economic Review is currently edited by Esther Duflo
More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().