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Leaving the market or reducing the coverage? A model-based experimental analysis of the demand for insurance

Published online by Cambridge University Press:  14 March 2025

Anne Corcos*
Affiliation:
CURAPP-ESS UMR 7319, CNRS, Université de Picardie, Pôle Université Cathédrale, 10, Placette Lafleur, BP 2716, 80027 Amiens Cedex 1, France
François Pannequin*
Affiliation:
CREST, ENS Paris-Saclay, Université Paris-Saclay, 61, Avenue du Président Wilson, 94235 Cachan Cedex, France
Claude Montmarquette*
Affiliation:
CIRANO, Université de Montréal, 1130 Sherbrooke Street West, Suite 1400, Montreal, QC H3A 2M8, Canada

Abstract

This study develops a theoretical, and experimental analysis addressing the issue of premium variations on the demand for insurance. Accounting for risk attitudes, our contribution disentangles the decision to buy insurance from the conditional demand (the non-null demand for insurance). Partially validating our theoretical predictions, our experimental results show that, when it has an effect, a non-massive increase in the premium (either in the unit price or the fixed cost) exclusively results in an exit from the insurance market (the risk lovers first, then the risk averters). Moreover, our study highlights a key feature of risk-seeking agents' behavior; they exhibit behavior consistent with gambling and opportunism rather than a lack of interest in insurance.

Type
Original Paper
Copyright
Copyright © 2017 Economic Science Association

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