Framing, Probability Distortions, and Insurance Decisions

9 Pages Posted: 29 Jun 2009

See all articles by Eric J. Johnson

Eric J. Johnson

Columbia University - Columbia Business School, Marketing

John C. Hershey

University of Pennsylvania - Operations & Information Management Department

Jacqueline Meszaros

affiliation not provided to SSRN

Howard Kunreuther

National Bureau of Economic Research (NBER); University of Pennsylvania - Wharton Risk Management and Decision Processes Center

Date Written: 1993

Abstract

A series of studies examines whether certain biases in probability assessments and perceptions of loss, previously found in experimental studies, affect consumers' decisions about insurance. Framing manipulations lead the consumers studied here to make hypothetical insurance-purchase choices that violate basic laws of probability and value. Subjects exhibit distortions in their perception of risk and framing effects in evaluating premiums and benefits. Illustrations from insurance markets suggest that the same effects occur when consumers make actual insurance purchases.

Keywords: insurance decisions, biases, probability distortions, framing

Suggested Citation

Johnson, Eric J. and Hershey, John C. and Meszaros, Jacqueline and Kunreuther, Howard C. and Kunreuther, Howard C., Framing, Probability Distortions, and Insurance Decisions (1993). Journal of Risk and Uncertainty, Vol. 7, No. 1, 1993, Available at SSRN: https://ssrn.com/abstract=1424065

Eric J. Johnson (Contact Author)

Columbia University - Columbia Business School, Marketing ( email )

New York, NY 10027
United States

John C. Hershey

University of Pennsylvania - Operations & Information Management Department ( email )

Philadelphia, PA 19104
United States

Jacqueline Meszaros

affiliation not provided to SSRN ( email )

Howard C. Kunreuther

University of Pennsylvania - Wharton Risk Management and Decision Processes Center ( email )

3819 Chestnut Street
Suite 130
Philadelphia, PA 19104
United States
215-898-4589 (Phone)

National Bureau of Economic Research (NBER)

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