Does Having Insurance Change Individuals' Self-confidence?

Raphael Guber, Martin Kocher and Joachim Winter ()
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Raphael Guber: Munich Center for the Economics of Aging, Max Planck Society, Germany

No 338, Economics Series from Institute for Advanced Studies

Abstract: Recent research in contract theory on the effects of behavioral biases implicitly assumes that they are stable, in the sense of not being affected by the contracts themselves. In this paper, we provide evidence that this is not necessarily the case. We show that in an insurance context, being insured against losses that may be incurred in a real-effort task changes subjects' self-confidence. Our novel experimental design allows us to disentangle selection into insurance from the effects of being insured by randomly assigning coverage after subjects revealed whether they want to be insured or not. We find that uninsured subjects are underconfident while those that obtain insurance have well-calibrated beliefs. Our results suggest that there might be another mechanism through which insurance affects behavior than just moral hazard.

Keywords: Overconfidence; insurance choice; underplacement (search for similar items in EconPapers)
JEL-codes: C91 D82 D84 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2018-03
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-ias
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https://irihs.ihs.ac.at/id/eprint/4602 First version, 2018 (application/pdf)

Related works:
Journal Article: Does having insurance change individuals' self‐confidence? (2021)
Working Paper: Does having insurance change individuals' self-confidence? (2020)
Working Paper: Does Having Insurance Change Individuals Self-Confidence? (2018)
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