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dc.contributor.authorSchmidt, Ulrichen_US
dc.date.accessioned2012-04-13en_US
dc.date.accessioned2012-04-19T07:54:07Z-
dc.date.available2012-04-19T07:54:07Z-
dc.date.issued2012en_US
dc.identifier.urihttp://hdl.handle.net/10419/57274-
dc.description.abstractThis paper analyzes insurance demand under prospect theory in a simple model with two states of the world and fair insurance contracts. We argue that two different reference points are reasonable in this framework, state-dependent initial wealth or final wealth after buying full insurance. Applying the value function of Tversky and Kahneman (1992), we find that for both reference points subjects will either demand full insurance or no insurance at all. Moreover, this decision depends on the probability of the loss: the higher the probability of the loss, the higher is the propensity to take up insurance. This result can explain empirical evidence which has shown that people are unwilling to insure rare losses at subsidized premiums and at the same time take-up insurance for moderate risks at highly loaded premiums.en_US
dc.language.isoengen_US
dc.publisherKiel Institute for the World Economy (IfW) Kielen_US
dc.relation.ispartofseriesKiel Working Papers 1764en_US
dc.subject.jelD14en_US
dc.subject.jelD81en_US
dc.subject.jelG21en_US
dc.subject.ddc330en_US
dc.subject.keywordinsurance demanden_US
dc.subject.keywordprospect theoryen_US
dc.subject.keywordflood insuranceen_US
dc.subject.keyworddiminishing sensitivityen_US
dc.subject.keywordloss aversionen_US
dc.titleInsurance demand under prospect theory: A graphical analysisen_US
dc.typeWorking Paperen_US
dc.identifier.ppn69009776Xen_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US
Appears in Collections:Kieler Arbeitspapiere, IfW
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