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A Microeconometric Analysis of Risk Aversion and the Decision to Self-Insure

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  • Cicchetti, Charles J
  • Dubin, Jeffrey A

Abstract

This study estimates a von Neumann-Morgenstern utility function using market data and microeconometric methods. The authors investigate the decision whether to purchase insurance against the risk of telephone line trouble in the home. Using the choices of approximately 10,000 residential customers, they determine the shape of the utility function and the degree of risk aversion. The authors find that risk aversion varies systematically in the population and varies with the level of income, and that the observed choice behavior is consistent with expected utility maximization. Copyright 1994 by University of Chicago Press.

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  • Cicchetti, Charles J & Dubin, Jeffrey A, 1994. "A Microeconometric Analysis of Risk Aversion and the Decision to Self-Insure," Journal of Political Economy, University of Chicago Press, vol. 102(1), pages 169-186, February.
    • Handle: RePEc:ucp:jpolec:v:102:y:1994:i:1:p:169-86
    DOI: 10.1086/261925
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    References listed on IDEAS

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    1. Shogren, Jason F, 1990. "The Impact of Self-protection and Self-insurance on Individual Response to Risk," Journal of Risk and Uncertainty, Springer, vol. 3(2), pages 191-204, June.
    2. Briys, Eric & Dionne, Georges & Eeckhoudt, Louis, 1989. "More on Insurance as a Giffen Good," Journal of Risk and Uncertainty, Springer, vol. 2(4), pages 415-420, December.
    3. Borch, Karl, 1986. "Insurance and Giffen's paradox," Economics Letters, Elsevier, vol. 20(4), pages 303-306.
    4. Viscusi, W Kip & Evans, William N, 1990. "Utility Functions That Depend on Health Status: Estimates and Economic Implications," American Economic Review, American Economic Association, vol. 80(3), pages 353-374, June.
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