Using a unique data set, the authors test whether households' deductible choices in auto and home insurance reflect stable risk preferences. Their test relies on a structural model that assumes households are objective expected utility maximizers and claims are generated by household-coverage specific Poisson processes. They find that the hypothesis of stable risk preferences is rejected by the data. Their analysis suggests that many households exhibit greater risk aversion in their home deductible choices than their auto deductible choices. They find that their results are robust to several alternative modeling assumptions.
101 Am. Econ. Rev. 591-631 (2011)
Scholarly Commons Citation
Barseghyan, Levon; Prince, Jeffrey; and Teitelbaum, Joshua C., "Are Risk Preferences Stable Across Contexts? Evidence from Insurance Data" (2011). Georgetown Law Faculty Publications and Other Works. Paper 1066.