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The affection effect in an incentive compatible insurance demand experiment

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  • Aseervatham, Vijay
  • Jaspersen, Johannes G.
  • Richter, Andreas

Abstract

Experimental studies have documented an affection effect in general decisions under risk as well as in insurance demand decisions. Most studies reporting this effect have not used salient and incentive compatible payments for the subjects. This might have skewed the results in favor of the hypotheses. In this note we revisit the affection effect in an insurance demand experiment with incentive compatible payments. We find the effect to be robust to the new experimental design further corroborating the established result of the affect heuristic in insurance decisions.

Suggested Citation

  • Aseervatham, Vijay & Jaspersen, Johannes G. & Richter, Andreas, 2015. "The affection effect in an incentive compatible insurance demand experiment," Economics Letters, Elsevier, vol. 131(C), pages 34-37.
    • Handle: RePEc:eee:ecolet:v:131:y:2015:i:c:p:34-37
    DOI: 10.1016/j.econlet.2015.03.029
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    References listed on IDEAS

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    Cited by:

    1. Peter John Robinson & W. J. Wouter Botzen & Fujin Zhou, 2021. "An experimental study of charity hazard: The effect of risky and ambiguous government compensation on flood insurance demand," Journal of Risk and Uncertainty, Springer, vol. 63(3), pages 275-318, December.
    2. S., Sai Krishnan & Iyer, Subramanian S., 2022. "Can waste aversion affect demand for insurance? Evidence from experiment and survey," Economics Letters, Elsevier, vol. 216(C).
    3. Johannes G. Jaspersen, 2016. "Hypothetical Surveys And Experimental Studies Of Insurance Demand: A Review," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 83(1), pages 217-255, January.
    4. Andreas Richter & Jochen Ruß & Stefan Schelling, 2019. "Insurance customer behavior: Lessons from behavioral economics," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 22(2), pages 183-205, July.
    5. Corcos, Anne & Montmarquette, Claude & Pannequin, François, 2020. "How the demand for insurance became behavioral," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 590-595.

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    More about this item

    Keywords

    Behavioral insurance; Insurance demand; Affect heuristic;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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