NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
loading...

Daniel Schwartz

Department of Industrial Engineering
University of Chile
Republica 701
Santiago, Chile

E-Mail: daschwar@dii.uchile.cl
Institutional Affiliation: University of Chile

NBER Working Papers and Publications

July 2017Risk Preferences in Small and Large Stakes: Evidence from Insurance Contract Decisions
with Benjamin L. Collier, 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 ...
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us