Narrow Framing and Long-Term Care Insurance

Gottlieb, Daniel; Mitchell, Olivia S.

doi:10.2139/ssrn.2580488

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Narrow Framing and Long-Term Care Insurance

Pension Research Council Working Paper No. 2015-03

27 Pages Posted: 20 Mar 2015

See all articles by Daniel Gottlieb

Olivia S. Mitchell

University of Pennsylvania - The Wharton School, Pension Research Council; University of Pennsylvania - The Wharton School; National Bureau of Economic Research (NBER)

There are 3 versions of this paper

Date Written: March 1, 2015

Abstract

We propose a model of narrow framing in insurance and test it using data from a new module we designed and fielded in the Health and Retirement Study. We show that respondents subject to narrow framing are substantially less likely to buy long-term care insurance than average. This effect is distinct from, and much larger than, the effects of risk aversion, or adverse selection, and it offers a new explanation for why people underinsure their later-life care needs.

JEL Classification: D03, G22, I13

Suggested Citation: Suggested Citation

Gottlieb, Daniel and Mitchell, Olivia S., Narrow Framing and Long-Term Care Insurance (March 1, 2015). Pension Research Council Working Paper No. 2015-03, Available at SSRN: https://ssrn.com/abstract=2580488 or http://dx.doi.org/10.2139/ssrn.2580488