Mental Accounting, Access Motives, and Overinsurance
VfS Annual Conference 2016 (Augsburg): Demographic Change from Verein für Socialpolitik / German Economic Association
Consumers frequently overinsure modest risks. I argue that confining consumers' insurance motives to a single motive - risk aversion - is responsible for the difficulty to rationalize this behavior. People who perform mental accounting have an additional motive for buying insurance. They perceive a risk of having insufficient means to self-insure. This complements behavioral approaches to explain the profitability of warranties and the dislike of deductibles. It accounts for several empirical regularities that are difficult to reconcile within existing models. Finally, it suggests that the way in which an insurer pays benefits influences the value and the cost of insurance.
JEL-codes: D11 D14 D81 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ias and nep-upt
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Journal Article: Mental Accounting, Access Motives, and Overinsurance (2020)
Working Paper: Mental accounting, access motives, and overinsurance (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc16:145489
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