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Climate Change Catastrophes and Insuring Decisions: A Study in the Presence of Ambiguity

36 Pages Posted: 6 Mar 2017 Last revised: 5 Jun 2017

Sara le Roux

Oxford Brookes University - Department of Economics

Date Written: June 3, 2017

Abstract

There has been very little research to test whether ambiguity affects individuals' decisions to insure themselves against the catastrophic effects of climate change. This paper attempts to study how individuals respond to the availability of an insurance that would safeguard their interests if a climate change catastrophe occurred. Moreover, if such an insurance is available to them, do they insure themselves sufficiently? Further, the study investigates if increased information regarding the probability of the catastrophic event, leads to an increase in insurance subscriptions. Finally, policy implications for the State are investigated - Can State intervention in the form of a "nudge" ensure a better outcome?

Keywords: Climate change catastrophes; insurance; ambiguity; Choquet expected utility; strategic substitutes; lemons market; nudge.

JEL Classification: C71, C91, D03, D81, Q54

Suggested Citation

le Roux, Sara, Climate Change Catastrophes and Insuring Decisions: A Study in the Presence of Ambiguity (June 3, 2017). Available at SSRN: https://ssrn.com/abstract=2927451 or http://dx.doi.org/10.2139/ssrn.2927451

Sara Le Roux (Contact Author)

Oxford Brookes University - Department of Economics ( email )

Wheatley Campus
Oxford, OX33 1HX
United Kingdom

HOME PAGE: http://saraleroux.weebly.com/

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