Replication data for: The Nature of Risk Preferences: Evidence from Insurance Choices

Principal Investigator(s):  View help for Principal Investigator(s) Levon Barseghyan; Francesca Molinari; Ted O'Donoghue; Joshua C. Teitelbaum

Version:  View help for Version V1

Name File Type Size Last Modified
  AER_Folder_I 12/06/2019 04:10:PM
  AER_Folder_II 12/06/2019 04:10:PM
  AER_Folder_III 12/06/2019 04:10:PM
  MCMCdiagnostics 12/06/2019 04:10:PM
  mcmc_model_3 12/06/2019 04:10:PM
  mcmc_model_3_1_unobs_heter 12/06/2019 04:10:PM
  mcmc_model_3_2_low_mfadden 12/06/2019 04:10:PM
  mcmc_model_3_3_crra 12/06/2019 04:10:PM
  mcmc_model_4 12/06/2019 04:10:PM
  mcmc_model_a_b_mu_unobs_heter 12/06/2019 04:10:PM

Project Description

Summary:  View help for Summary We use data on insurance deductible choices to estimate a structural model of risky choice that incorporates "standard" risk aversion (diminishing marginal utility for wealth) and probability distortions. We find that probability distortions—characterized by substantial overweighting of small probabilities and only mild insensitivity to probability changes—play an important role in explaining the aversion to risk manifested in deductible choices. This finding is robust to allowing for observed and unobserved heterogeneity in preferences. We demonstrate that neither Köszegi-Rabin loss aversion alone nor Gul disappointment aversion alone can explain our estimated probability distortions, signifying a key role for probability weighting.

Scope of Project

JEL Classification:  View help for JEL Classification
      D14 Household Saving; Personal Finance
      D81 Criteria for Decision-Making under Risk and Uncertainty
      G22 Insurance; Insurance Companies; Actuarial Studies


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Published Versions

V1 [2019-12-06]

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