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The informational content of household decisions with applications to insurance under asymmetric information

Author

Listed:
  • Dionne, Georges

    (HEC Montreal, Canada Research Chair in Risk Management)

  • Gouriéroux, Christian

    (Toulouse School of Economics)

  • Vanasse, Charles

    (Université de Montréal)

Abstract

We discuss how to detect the informational content of household decisions among the explanatory variables of econometric models. Two applications on the choice of automobile insurance contracts and the demand for life insurance are provided. We show that the information provided by additional decision variables is rather weak and often non significant. In particular, there is no residual asymmetric information when appropriate risk classification is applied in automobile insurance; so, the choice of a deductible does not reveal any information about individual risk. Similarly, the choice of a particular portfolio does not add information on risk aversion in life insurance contracting.

Suggested Citation

  • Dionne, Georges & Gouriéroux, Christian & Vanasse, Charles, 1998. "The informational content of household decisions with applications to insurance under asymmetric information," Working Papers 00-0, HEC Montreal, Canada Research Chair in Risk Management.
    • Handle: RePEc:ris:crcrmw:2000_000
    as

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    References listed on IDEAS

    as
    1. Puelz, Robert & Snow, Arthur, 1994. "Evidence on Adverse Selection: Equilibrium Signaling and Cross-Subsidization in the Insurance Market," Journal of Political Economy, University of Chicago Press, vol. 102(2), pages 236-257, April.
    2. Dionne, Georges & Gagne, Robert & Gagnon, Francois & Vanasse, Charles, 1997. "Debt, moral hazard and airline safety An empirical evidence," Journal of Econometrics, Elsevier, vol. 79(2), pages 379-402, August.
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    4. Dionne, G & Vanasse, C, 1992. "Automobile Insurance Ratemaking in the Presence of Asymmetrical Information," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 7(2), pages 149-165, April-Jun.
    5. Murphy, Kevin M & Topel, Robert H, 2002. "Estimation and Inference in Two-Step Econometric Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 88-97, January.
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    More about this item

    Keywords

    nformational content; household decisions; automobile insurance; demand for life insurance; residual asymmetric information; risk classification; deductible; risk aversion; conditional independence; endogenous choice;
    All these keywords.

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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