Probability weighting and insurance demand in a unified framework

Johannes G. Jaspersen (), Richard Peter () and Marc A. Ragin ()
Additional contact information
Johannes G. Jaspersen: LMU Munich
Richard Peter: University of Iowa
Marc A. Ragin: University of Georgia

The Geneva Risk and Insurance Review, 2023, vol. 48, issue 1, No 3, 63-109

Abstract: Abstract We provide a comprehensive analysis of the impact of probability weighting on optimal insurance demand in a unified framework. We identify decreasing relative overweighting as a new local condition on the probability weighting function that is useful for comparative static analysis. We discuss the effects of probability weighting on coinsurance, deductible choice, insurance demand for low-probability, high-impact risks versus high-probability, low-impact risks, and insurance demand in the presence of nonperformance risk. Probability weighting can make better or worse predictions than expected utility depending on the insurance demand problem at hand.

Keywords: Insurance demand; Probability weighting; Non-expected utility; Comparative statics; Decreasing relative overweighting; D11; D81; G22 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1057/s10713-022-00074-x Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
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:pal:genrir:v:48:y:2023:i:1:d:10.1057_s10713-022-00074-x

Ordering information: This journal article can be ordered from
http://www.springer.com/journal/10713

DOI: 10.1057/s10713-022-00074-x

Access Statistics for this article

The Geneva Risk and Insurance Review is currently edited by Michael Hoy and Nicolas Treich

More articles in The Geneva Risk and Insurance Review from Palgrave Macmillan, International Association for the Study of Insurance Economics (The Geneva Association) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().