Regret, rejoicing, and mixed insurance

Yoichiro Fujii, Mahito Okura and Yusuke Osaki

Economic Modelling, 2016, vol. 58, issue C, 126-132

Abstract: This study examines how regret and rejoicing affect mixed insurance choice and demand. In contrast to expected utility theory, regret and rejoicing may explain why some individuals prefer to hold mixed insurance rather than term insurance. In this study, we derive the conditions under which an individual prefers to hold mixed insurance rather than term insurance. We also study demand for mixed insurance and specify the factors that influence the demand motive. The demand motive is determined by the risk effect and the rejoicing effect, when the rejoicing effect dominates the risk effect, under-insurance is optimal, and vice versa.

Keywords: Full insurance; Mixed insurance; Regret; Rejoicing (search for similar items in EconPapers)
JEL-codes: D03 D81 G22 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:58:y:2016:i:c:p:126-132

DOI: 10.1016/j.econmod.2016.05.026

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