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http://ssrn.com/abstract=1220663
 
 

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Are Risk Preferences Stable Across Contexts? Evidence from Insurance Data


Levon Barseghyan


Cornell University

Jeffrey Prince


Indiana University - Kelley School of Business - Department of Business Economics & Public Policy

Joshua C. Teitelbaum


Georgetown University Law Center

April 1, 2011

American Economic Review, Vol. 101, No. 2, pp. 591-631, 2011

Abstract:     
Using a unique data set, we test whether households' deductible choices in auto and home insurance reflect stable risk preferences. Our test relies on a structural model that assumes households are objective expected utility maximizers and claims are generated by household-coverage specific Poisson processes. We find that the hypothesis of stable risk preferences is rejected by the data. Our analysis suggests that many households exhibit greater risk aversion in their home deductible choices than their auto deductible choices. We find that our results are robust to several alternative modeling assumptions.

Number of Pages in PDF File: 41

Keywords: deductible choices, risk preferences, insurance, stability

JEL Classification: D11, D83

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Date posted: August 12, 2008 ; Last revised: May 13, 2014

Suggested Citation

Barseghyan, Levon and Prince, Jeffrey and Teitelbaum, Joshua C., Are Risk Preferences Stable Across Contexts? Evidence from Insurance Data (April 1, 2011). American Economic Review, Vol. 101, No. 2, pp. 591-631, 2011. Available at SSRN: http://ssrn.com/abstract=1220663

Contact Information

Levon Barseghyan (Contact Author)
Cornell University ( email )
Ithaca, NY 14853
United States
Jeffrey Prince
Indiana University - Kelley School of Business - Department of Business Economics & Public Policy ( email )
Bloomington, IN 47405
United States

Joshua C. Teitelbaum
Georgetown University Law Center ( email )
600 New Jersey Avenue NW
Washington, DC 20001
United States
202-661-6589 (Phone)
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