Self-insurance decisions and sources of ambiguity (original) (raw)

Abstract

Are buyers willing to pay more for self-insurance coverage when the probabilities of loss are ambiguous? Is willingness to pay affected by the source of ambiguity? This paper addresses these main research questions. Ambiguity has multiple sources: it can derive from lack of information on the context where the decision-maker operates or can be a consequence of ignorance on her own characteristics or performance. After measuring subjects’ willingness to pay when losses are risky, we relate the probability to incur in losses both to events that are ‘external’ to the individual and to occurrences that regard the individual absolute performance in a task, i.e. to ‘internal’ sources of ambiguity.

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