Mental Accounting, Access Motives, and Overinsurance

33 Pages Posted: 30 May 2015 Last revised: 26 Sep 2016

See all articles by Markus Fels

Markus Fels

University of Dortmund - Department of Economics

Date Written: August 18, 2015

Abstract

I explore the potential of an alternative insurance motive, the access motive, to better understand attitudes toward modest-risk insurance. I derive the value of partial insurance based on the access motive and show how it critically depends on the way in which the insurer pays benefits. I argue that people's tendency to perform mental accounting makes the access motive relevant for understanding the popularity of insurance against modest risks such as warranties and the avoidance of deductibles. It helps to explain several empirical regularities that are difficult to reconcile within existing models.

Keywords: Extended Warranty, Deductibles, Insurance Demand, Mental Accounting, Access Motive

JEL Classification: D11, D14, D81, G22

Suggested Citation

Fels, Markus, Mental Accounting, Access Motives, and Overinsurance (August 18, 2015). Available at SSRN: https://ssrn.com/abstract=2611896 or http://dx.doi.org/10.2139/ssrn.2611896

Markus Fels (Contact Author)

University of Dortmund - Department of Economics ( email )

D-44221 Dortmund
Germany

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