Insurance Choices and Sources of Ambiguity
Daniela Cagno and
Daniela Grieco
Additional contact information
Daniela Cagno: Luiss Guido Carli
Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, 2023, vol. 9, issue 1, No 10, 295-319
Abstract:
Abstract Uninsurance and underinsurance represent a major policy challenge. A key reason why agents make mistakes might be ascribed to the ambiguity affecting insurance decisions. This paper investigates self-insurance decisions when the probabilities of loss are ambiguous and ambiguity is generated by different sources. We present a model and a set of lab experiments to address two main research questions: are buyers willing to pay more in presence of ambiguity with respect to risk? Is the willingness to pay affected by the source of ambiguity? After measuring subjects’ willingness to pay for insurance when losses are risky, we relate the probability to face losses both to ambiguous events that are context-related (‘external’ sources of ambiguity), and to events that regard the individual ability (‘internal’ sources of ambiguity). We show that subjects’ willingness to pay for insurance depends on the specific source of ambiguity, being lower than willingness to pay in case of risk when the source of ambiguity is internal and decision-makers exhibit overconfidence.
Keywords: Insurance; Ambiguity; Risk; Confidence; Coverage (search for similar items in EconPapers)
JEL-codes: C91 D81 (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations:
Downloads: (external link)
http://link.springer.com/10.1007/s40797-022-00193-4 Abstract (text/html)
Access to the full text of the articles in this series is restricted.
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:spr:italej:v:9:y:2023:i:1:d:10.1007_s40797-022-00193-4
Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/40797
DOI: 10.1007/s40797-022-00193-4
Access Statistics for this article
Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti is currently edited by Roberto Cellini
More articles in Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti from Springer, Società Italiana degli Economisti (Italian Economic Association) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla (sonal.shukla@springer.com) and Springer Nature Abstracting and Indexing (indexing@springernature.com).