NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Benjamin L. Collier

Department of Risk, Insurance,
and Healthcare Management
Fox School of Business
1801 Liacouras Walk
Philadelphia, PA 19122
Tel: 215-204-8155

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: Temple University

NBER Working Papers and Publications

July 2017Risk Preferences in Small and Large Stakes: Evidence from Insurance Contract Decisions
with Daniel Schwartz, Howard C. Kunreuther, Erwann O. Michel-Kerjan: w23579
We examine risk preferences using the flood insurance decisions of over 100,000 households. In each contract, households make a small stakes decision, the deductible, and a large stakes one, the coverage limit. Over 94 percent of household choose one of the two lowest deductibles out of six options, and 77 percent fully insure, select a coverage limit of at least their home’s replacement cost. Households must be extremely risk averse to explain each of these choices with standard expected utility models. Households’ deductible choices imply a median relative risk aversion of 108. Households’ coverage limit choices require a median relative risk aversion of at least 112. Their substantial risk aversion over large stakes is due to households’ tendency to fully insure despite paying premiums ...
September 2016Firms’ Management of Infrequent Shocks
with Andrew F. Haughwout, Howard C. Kunreuther, Erwann O. Michel-Kerjan, Michael A. Stewart: w22612
We examine businesses’ financial management of a rare, severe event using detailed firm-level data collected following Hurricane Sandy in the New York area. Credit played a prominent role in financing recovery; more negatively affected firms took on debt because of Sandy (38%) than received insurance payments (15%) in our data. Negatively affected firms were often credit constrained after the shock. While firms’ demand for insurance is often explained by financing frictions, we find that the most credit constrained firms after the event, younger firms and smaller firms, were the least likely to insure before it.
 
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