Abstract

AbstractWe examine optimal insurance purchase decisions of individuals that exhibit behavior consistent with Regret Theory. Our model incorporates a utility function that assigns a disutility to outcomes that are ex post suboptimal, and predicts that individuals with regret‐theoretical preferences adjust away from the extremes of full insurance and no insurance coverage. This prediction holds for both coinsurance and deductible contracts, and can explain the frequently observed preferences for low deductibles in markets for personal insurance.

Full Text
Paper version not known

Talk to us

Join us for a 30 min session where you can share your feedback and ask us any queries you have

Schedule a call