American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Are Risk Preferences Stable across Contexts? Evidence from Insurance Data
American Economic Review
vol. 101,
no. 2, April 2011
(pp. 591–631)
Abstract
Using a unique dataset, we test whether households' deductible choices in auto and home insurance reflect stable risk preferences. Our test relies on a structural model that assumes households are objective expected utility maximizers and claims are generated by household-coverage specific Poisson processes. We find that the hypothesis of stable risk preferences is rejected by the data. Our analysis suggests that many households exhibit greater risk aversion in their home deductible choices than their auto deductible choices. Our results are robust to several alternative modeling assumptions. (JEL D11, D83)Citation
Barseghyan, Levon, Jeffrey Prince, and Joshua C. Teitelbaum. 2011. "Are Risk Preferences Stable across Contexts? Evidence from Insurance Data." American Economic Review, 101 (2): 591–631. DOI: 10.1257/aer.101.2.591Additional Materials
JEL Classification
- D11 Consumer Economics: Theory
- D83 Search; Learning; Information and Knowledge; Communication; Belief