Camerer, Colin and Kunreuther, Howard (1989) Experimental Markets for Insurance. Journal of Risk and Uncertainty, 2 (3). pp. 265-300. ISSN 0895-5646. http://resolver.caltech.edu/CaltechAUTHORS:20110215-144258866
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This article extends the large amount of research on double-oral auction markets to hazards that produce only losses. We report results from a series of experiments in which subjects endowed with low-probability losses can pay a premium for insurance protection. Insurers specify the price at which they are willing to assume the risk of a loss. Insurance prices approach expected value for a large range of probabilities and loss amounts. Subjects seem to realize losses are statistically independent. Prices are not affected by ambiguity about the probability of loss.
|Additional Information:||© 1989 Kluwer Academic Publishers. Thanks to Michael Chernew, Marc Knez, Lisabeth Miller, and especially Peter Knez for research assistance, and to Jonathan Baron, Robyn Dawes, Robin Hogarth, Charles Plott and Uzi Segal for helpful comments. Useful suggestions were received from audiences at the Fourth Experimental Economics Conference (Tucson), the First Conference on Behavioral Decision Making (Cornell), ORSN TIMS (Miami), and seminars at Washington University and Carnegie-Mellon. This research was supported by the Alfred P. Sloan Foundation (grant #85-5-1), The National Science foundation (grant #SES87-08566), and the Wharton Risk and Decision Process Center.|
|Subject Keywords:||insurance, experimental economics, prospect theory|
|Usage Policy:||No commercial reproduction, distribution, display or performance rights in this work are provided.|
|Deposited By:||Tony Diaz|
|Deposited On:||09 Mar 2011 22:44|
|Last Modified:||09 Mar 2011 22:44|
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