NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Marc A. Ragin

University of Georgia
610 S Lumpkin Street
Moore-Rooker A417
Athens, GA 30602

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Institutional Affiliation: University of Georgia

NBER Working Papers and Publications

November 2019Predicting Insurance Demand from Risk Attitudes
with Johannes G. Jaspersen, Justin R. Sydnor: w26508
Can measured risk attitudes and associated structural models predict insurance demand? In an experiment (n = 1,730), we elicit measures of utility curvature, probability weighting, loss aversion, and preference for certainty and use them to parameterize seventeen common structural models (e.g., expected utility, cumulative prospect theory). Subjects also make twelve insurance choices over different loss probabilities and prices. The insurance choices show coherence and some correlation with various risk-attitude measures. Yet all the structural models predict insurance poorly, often less accurately than random predictions. Simpler prediction heuristics show more promise for predicting insurance choices across different conditions.
 
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