Estimating Risk Preferences from Deductible Choice
نویسندگان
چکیده
We estimate the distribution of risk preferences using a large data set of deductible choices in auto insurance contracts. To do so, we develop a structural econometric model of adverse selection that allows for unobserved heterogeneity in both risk (claim rate) and risk aversion. We use data on realized claims to estimate the distribution of claim rates and data on deductible and premium choices to estimate the distribution of risk aversion and how it correlates with risk. We find large heterogeneity in risk attitudes: while the majority of individuals are almost risk neutral with respect to lotteries of 100 dollar magnitude, an important fraction of the individuals exhibit significant risk aversion even with respect to such relatively small bets. The estimates imply that women are more risk averse than men, that risk aversion exhibits a U-shape with respect to age, and that most proxies for income and wealth are positively associated with absolute risk aversion. Finally, unobserved heterogeneity in risk aversion is more important than that of risk, and risk and risk aversion are positively correlated. Journal of Economic Literature classification numbers: D82, G22.
منابع مشابه
A comparison of alternative methods to model endogeneity in count mod- els. An application to the demand for health care and health insurance choice
Several estimators have been suggested to tackle the problem of endogenous regressors and selectivity in count regression models. They differ in the structure and the degree of parameterization of the underlying models. The estimation of health services utilization conditional on the choice of different forms of health insurance provides a classical example of such problems. In Switzerland, bas...
متن کاملA comparison of alternative methods to model endogeneity in count
Several estimators have been suggested to tackle the problem of endogenous regressors and selectivity in count regression models. They differ in the structure and the degree of parametrization of the underlying models. The estimation of health services utilization conditional on the choice of different forms of health insurance provides a classical example of such problems. In Switzerland, basi...
متن کاملInvestigating the Role of real Money Balances in Households' Preferences function in the Framework of the Assets Pricing Models (M-CCAPM): Case study of Iran
In this paper, we try to develop and modify the basic model of the consumption-based capital asset pricing model by adding the growth in real money balances rate as a risk factor in the household's utility function as (M-CCAPM). For this purpose, two forms of utility function with constant relative risk aversion (CRRA) preferences and recursive preferences have been used such that M1 and M2 are...
متن کاملEvaluation of Preferences in Receiving Facilities Using Discrete Choice Experiment Technique
The present study evaluates the effect of some of the most important variables affecting the preferences of bank loan applicants, based on the discrete choice test method. Initially, the variables and their levels were identified after consultation with banking experts and the required information was collected through a questionnaire. The results show that any increase in interest rates, inten...
متن کاملCost Sharing in Health Insurance: A Risk Selection Instrument?
Health insurance is potentially subject to risk selection, i.e. adverse selection on the part of consumers and cream skimming on the part of insurers. Adverse selection models predict that competitive health insurers can eschew high-risk individuals by o¤ering contracts with low deductibles or copayment rates, while attracting low-risk individuals with higher copayments, resulting in a separati...
متن کامل