Insuring Replaceable Possessions

• Autor: Meza, David ; Reyniers, Diane
• Assuntos: Attribution ; Inconsistency ; Insurance ; Money ; Risk ; Uninsured people
• É parte de: Economica (London), 2023-01, Vol.90 (357), p.271-284
• Notas: Diane Reyniers is a Professor of Managerial Economics and Strategy in the Department of Management at the LSE. She obtained both her MSc and PhD from the LSE.
  David de Meza is the Eric Sosnow Professor of Management in the LSE Department of Management. He obtained both his BSc and MSc from the LSE.
  This paper is part of the Economica 100 Series. Economica, the LSE “house journal” is now 100 years old. To commemorate this achievement, we are publishing 100 papers by former students, as well as current and former faculty.
  
• Descrição: Equivalencebetween insuring income and what is bought with income is commonly assumed. It seems to be implicitly held that uninsured but replaceable goods will always be replaced if they fail. This does not follow. People may have difficulty coming up with the money to pay for a replacement out of pocket. Also, the income effect of a loss may mean that replacement is not worthwhile. We show that as a result, equivalence breaks down. Both theory and evidence are provided. Implications include a tendency of empirical papers to overestimate risk aversion, a reason why demand for insurance increases with income, and the mistaken attribution of preference inconsistency. This paper is part of the Economica 100 Series. Economica, the LSE “house journal” is now 100 years old. To commemorate this achievement, we are publishing 100 papers by former students, as well as current and former faculty. David de Meza is the Eric Sosnow Professor of Management in the LSE Department of Management. He obtained both his BSc and MSc from the LSE. Diane Reyniers is a Professor of Managerial Economics and Strategy in the Department of Management at the LSE. She obtained both her MSc and PhD from the LSE.
  
• Editor: London: Blackwell Publishing Ltd
  
• Idioma: Inglês