Risk preference heterogeneity and multiple demand for insurance
نویسندگان
چکیده
Standard economic theory assumes individuals make decisions over a set of risky domains according to their own risk preferences which are stable across these decision contexts. The validity of this assumption of context-invariant risk preference has led to debate in the literature. We exploit latent class analysis to identify conditional on predicted and realized risk how heterogeneity in risk preferences affects demand for different types of insurance. Our results provide evidence of the existence of domain general components in risk preferences, in addition we find that non-preference factors such as context specificity play an important role. JEL Classification Numbers G11, D82, G22, I11
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