Individual vs. group decision-making: an experiment on dynamic choice under risk and ambiguity

This paper focuses on the comparison of individual and group decision-making, in a stochastic inter-temporal problem in two decision environments, namely risk and ambiguity. Using a consumption/saving laboratory experiment, we investigate behaviour in four treatments: (1) individual choice under risk; (2) group choice under risk; (3) individual choice under ambiguity and (4) group choice under ambiguity. Comparing decisions within and between decision environments, we find an anti-symmetric pattern. While individuals are choosing on average closer to the theoretical optimal predictions, compared to groups in the risk treatments, groups tend to deviate less under ambiguity. Within decision environments, individuals deviate more when they choose under ambiguity, while groups are better planners under ambiguity rather than under risk. Our results extend the often observed pattern of individuals (groups) behaving more optimally under risk (ambiguity), to its dynamic dimension.

     

Risk,ambiguity, and insurance

In a series of experiments, economically sophisticated subjects, including professional actuaries, priced insurance both as consumers and as firms under conditions of ambiguity. Findings support implications of the Einhorn-Hogarth ambiguity model: (1) For low probability-of-loss events, prices of both consumers and firms indicated aversion to ambiguity; (2) As probabilities of losses increased, aversion to ambiguity decreased, with consumers exhibiting ambiguity preference for high probability-of-loss events; and (3) Firms showed greater aversion to ambiguity than consumers. The results are shown to be incompatible with traditional economic analysis of insurance markets and are discussed with respect to the effects of ambiguity on the supply and demand for insurance.University of Chicago Graduate School of BusinessUniversity of Pennsylvania The Wharton School     

Adverse Selection,Bequests, Crowding Out,and Private Demand for Insurance: Evidence from the Long-term Care Insurance Market

Adverse selection, moral hazard, and crowding out by public insurance have all been proposed as theoretical reasons for why the market for private long-term care insurance has been slow to evolve in the U.S. Using national samples of the elderly and near elderly, this study investigates which is most important. The data contain direct measures of risk aversion, expectations of future nursing home use and living to old age, and the bequest motive. For both groups, we find evidence of adverse selection, and, for the elderly, crowding out of private long-term care insurance by Medicaid. However, we do not find that demand for such insurance is motivated either by bequest or exchange motives.     

The economics of adding and subdividing independent risks: Some comparative statics results

In this paper we address the problem of determining whether adding independent risks or subdividing them is a good substitute for insurance. Despite the fact that accepting more i.i.d. risks increases total risk, it is shown that some risk-averse decision makers can rationally reduce their demand for insurance by doing so. Similarly, a better diversified portfolio of i.i.d. risky assets can rationally be more insured, even if diversification is a risk-reduction scheme. We derive conditions sufficient to obtain unambiguous comparative statics results. Assuming that absolute risk aversion is decreasing and that the fourth derivative of the utility function is positive, we show that diversification is an exceptionally good substitute for insurance. Under the same conditions, adding independent risks to wealth reduces the demand for insurance on each unit.     

The impact of health insurance cost-sharing method on healthcare utilisation in China

In current Chinese health insurance programmes, there are two types of cost-sharing methods: the time-of-service copayment policy and the reimbursement policy. In contrast to the copayment participants, reimbursement participants need to pay for all medical expenses in advance. We study the effect of the reimbursement policy on the utilisation of healthcare services in China. The theoretical analysis indicates that the medical consumption of low income households will be less than the optimal consumption level when enrolled in a reimbursement programme instead of a copayment programme. Empirically, using data from the China Health and Retirement Longitudinal Study (CHARLS), we find that the total inpatient expenditure of the reimbursement participants is 12.7% lower than that of copayment enrolees, and the reimbursement arrangement negatively impacts low-income and rural populations. Therefore, reimbursement participants, those who are financially constrained, are more likely to suffer the up-front payment burden and finally reduce their healthcare needs.     

Ambiguity aversion in multi-armed bandit problems

In multi-armed bandit problems, information acquired from experimentation is valuable because it tells the agent whether to select a particular option again in the future. This article tests whether people undervalue this information because they are ambiguity averse, or have a distaste for uncertainty about the average quality of each alternative. It is shown that ambiguity averse agents have lower than optimal Gittins indexes, appearing to undervalue information from experimentation, but are willing to pay more than ambiguity neutral agents to learn the true mean of the payoff distribution, appearing to overvalue objectively given information. This prediction is tested with a laboratory experiment that elicits a Gittins index and a willingness to pay on six two-armed bandits. Consistent with the predictions of ambiguity aversion, the Gittins indexes are significantly lower than optimal and willingnesses to pay are significantly higher than optimal.     

Dynamic awareness and zero probability beliefs

We study behavioral patterns of insurance demand for low-probability large-loss events (catastrophic losses). Individual patterns of belief formation and risk attitude that were suggested in the behavioral decisions literature emerge robustly in the current set of insurance choices. However, social comparison effects are less robust. We do not find any evidence for peer effects (through social-loss aversion or imitation) on insurance take-up. In contrast, we find support for the prediction that people underweight others’ relevant information in their own decision making.     

日本农村社会养老保险制度的运行模式及其启示

二战后：随着社会经济的恢复和发展，日本开始重视农业劳动者的养老保险需求，并逐步建立了农村社会养老保险制度，形成了分层次、多类别的自保公助型农村养老保障模式，为日本农村社会经济发展与稳定构筑了一道“安全网”。日本农村社会养老保险的运行模式对于构建我国农村社会养老保险制度具有一定的参考价值，必须结合我国国情，建立适合不同农民需求、充分发挥社区互助的有中国特色的农村社会养老保险制度。     

Informal workers and Kenya’s National Hospital Insurance Fund: Identifying barriers to voluntary participation

This article investigates the barriers to informal workers’ voluntary participation in Kenya’s national health insurance scheme – the National Hospital Insurance Fund. Based on primary data from both qualitative and quantitative methods, we find that the key determinants of enrolment include social factors, such as marital status, which create demand for insurance, and the role of informal workers’ associations that promote the voluntary uptake of health insurance and prevent default through contribution support. Participation barriers and reasons for inactiveness stem from the nature of informal work characterized by irregular earnings, which combine with apprehension about having to pay penalty charges for the late payment of premiums, inadequate levels of knowledge about health insurance schemes, institutional constraints such as complex registration procedures, as well as premium costs and poor-quality services, all of which discourage enrolment or the reactivation of lapsed membership. There is thus a need for health insurance schemes, such as Kenya’s National Hospital Insurance Fund, to educate informal workers on insurance services and protocols and to improve services to encourage uptake and reduce default behaviour.     

Granny Versus Game Theorist: Ambiguity in Experimental Games

We report on an experiment in which subjects choose actions in strategic games with either strategic complements or substitutes against a granny, a game theorist or other subjects. The games are selected in order to test predictions on the comparative statics of equilibrium with respect to changes in strategic ambiguity. We find that subjects face higher ambiguity while playing against the granny than playing against the game theorist if we assume that subjects are ambiguity averse. Moreover, under the same assumption, subjects choose more secure actions in games more prone to ambiguity which is in line with the predictions.      

Insuring September 11th: Market Recovery and Transparency

The terrorist attacks on the World Trade Center caused unprecedented economic and structural ramifications in the insurance markets, resulting in considerable uncertainty and informational asymmetry. We test several theoretical models of how markets respond to and recover from extreme capital shocks. Using the capacity constraint, post-loss investment and implicit insurance contract models, we develop testable hypotheses predicting the temporal and cross sectional variation in insurance company stock prices following September 11th. We find evidence consistent with the models' predictions, in particular, the predictions regarding relations between net losses and leverage and stock price performance after the shock.     

One-sided commitment in dynamic insurance contracts: Evidence from private health insurance in Germany

This paper studies long-term private health insurance (PHI) in Germany. It describes the main actuarial principles of premium calculation and relates these to existing theory. In the German PHI policyholders do not commit to renewing their insurance contracts, but insurers commit to offering renewal at a premium rate that does not reflect revealed future information about the insured risk. We show that empirical results are consistent with theoretical predictions from one-sided commitment models: front-loading in premiums generates a lock-in of consumers, and more front-loading is generally associated with lower rates of lapse. Due to a lack of consumer commitment, dynamic information revelation about risk type implies that high-risk policyholders are more likely to retain their PHI contracts than are low-risk types.     

Ambiguous life expectancy and the demand for annuities

In this paper, ambiguity aversion to uncertain survival probabilities is introduced in a static life-cycle model with a bequest motive to study the optimal demand for annuities. Provided that annuities’ return is sufficiently large, and notably when it is fair, positive annuitization is known to be the optimal strategy of ambiguity neutral individuals. Conversely, we show that the demand for annuities decreases with ambiguity aversion and that there exists a finite degree of aversion above which the demand is non-positive: the optimal strategy is then to either sell annuities short or to hold zero annuities if the former option is not available. To conclude, ambiguity aversion appears to be a relevant candidate for explaining the annuity puzzle.     

An experimental investigation of the impact of ambiguity on the valuationof self-insurance and self-protection

We build two experimental markets to examine individual valuations of risk reductions with two risk-management tools: self-insurance and self-protection. We find no positive evidence that the risk-reducing mechanisms constitute a “frame.” Ambiguity in the probability on average affects valuation only weakly, and changes in the representation of ambiguity do not alter valuation. Finally, unlike the results obtained by Hogarth and Kunreuther for the case of market insurance, our findings do not provide a strong support for the “Anchoring and Adjustment” ambiguity model.     

Germany's Social Long-term Care Insurance: Design, Implementation and Evaluation

Across all industrialized countries, issues surrounding population ageing have captured the attention of policymakers. Among its manifold ramifications, disability-related poverty and the projected growth in public funding of long-term care demand close attention. Comparative studies have revealed distinct policy approaches to long-term care across different countries, but a shared interest in market-oriented policy design and cost containment. In Germany, legislation on mandatory and universal dependency care insurance came into force recently. The 1994 Dependency Insurance Act responded to limited market insurance against the financial risk of long-term care, deficiencies in servicing long-term care dependants and the fiscal crisis of German communities, which had to provide social assistance to a growing number of destitute care clients. The new social long-term care insurance scheme adopts basic features of existing German social insurance schemes even as it challenges the country's social insurance legacy in terms of cost containment strategies and consumer-directed provision. After three years of operation, the new programme is technically in place and financially healthy. However, critics point to its tight screening procedures, persistent shortages in the supply of formal care, and fraud. Equity issues, quality of care and consumer direction have also drawn critical attention. A variety of scenarios for programme improvement are conceivable. Coverage could be extended and payments offered to family caregivers. A comprehensive "cash and counselling" concept should be developed. Finally, programme efficiency depends on public accountability and quality auditing. Choice should be informed by ongoing research into long-term care and the broader impacts of long-term care policy.     

Social comparison and risky choices

Theories (and experiments) on decision making under risk typically ignore (and exclude) a social context. We explore whether this omission is detrimental. To do so we experimentally investigate the simplest possible situation with both social comparison and risk: participants choose between two lotteries while a referent faces a fixed payoff. Participants are more risk averse when they can earn at most as much as their referent (loss situation) than when they are ensured they will earn at least as much as their referent (gain situation). Prospect theory with a social reference point would predict the exact opposite behavior. These results show that straightforward extensions of existing theories to allow for social comparison do not provide accurate predictions.     

Ambiguity Aversion in the Field of Insurance: Insurers’ Attitude to Imprecise and Conflicting Probability Estimates

This article presents the results of a survey designed to test, with economically sophisticated participants, Ellsberg’s ambiguity aversion hypothesis, and Smithson’s conflict aversion hypothesis. Based on an original sample of 78 professional actuaries (all members of the French Institute of Actuaries), this article provides empirical evidence that ambiguity (i.e. uncertainty about the probability) affect insurers’ decision on pricing insurance. It first reveals that premiums are significantly higher for risks when there is ambiguity regarding the probability of the loss. Second, it shows that insurers are sensitive to sources of ambiguity. The participants indeed, charged a higher premium when ambiguity came from conflict and disagreement regarding the probability of the loss than when ambiguity came from imprecision (imprecise forecast about the probability of the loss). This research thus documents the presence of both ambiguity aversion and conflict aversion in the field of insurance, and discuses economic and psychological rationales for the observed behaviours.     

Social Insurance and the Contributory Principle: A Paradox in Contemporary British Social Policy

At the outset of the twenty-first century, the situation of British National Insurance is one of paradox. Due to socioeconomic changes and successive government policies over the past three decades, the contributory principle, which was a cornerstone of social security reconstruction after World War II, has been in remarkable decline. At the same time contributions to the National Insurance Fund increased significantly and continues to represent a substantial form of total social security revenue. The contributory principle has a broad public appeal, but National Insurance does not figure prominently in public debates and the system is poorly understood. Recent policies have added to the ambiguity as to how far the contributory principle confers social rights, and have further eroded its rationale. The article states that this situation is not matched by developments in other European countries. Despite substantial reforms and heated debates marked by controversy, the prospect for social insurance and the contributory principle appears considerably better than in the UK. One major explanation is, the article argues, the distinctive notion of social insurance in Britain and particularly the lack of "wage-replacement" transfers. Elsewhere in Europe, earnings-related transfers sustain a very different incentive structure, institutional involvement and wider public participation in matters of social insurance.     

Cost Perceptions and Voter Demand for Environmental Risk Regulation: The Double Effect of Hidden Costs

This paper reports the first detailed empirical examination of the effects of voter cost perceptions on demand for environmental risk regulations. Using a statewide random sample of Washington's electorate, I examine voting behavior for a proposed regulation of gasoline stations under varying cost and distributional assumptions. Results suggest normative concerns are as important in explaining support as are expected risk reduction benefits. These norms include making polluters pay, imposing larger burdens on polluters with higher ability to pay, and enforcing public property rights. In contrast, potential price increases as a result of regulation have negligible effects on voter support.     

给付保险金性质辨析

侵权责任、违约责任和缔约过失责任是民事责任的三种类型。就民事责任与民事义务关系而言,民法学界通说认为民事责任是违反民事义务的结果。保险事故发生导致保险标的损失或被保险人死亡、伤残,保险人应当赔偿或给付保险金,但这是保险人履行合同义务的行为,非为“承担保险责任”。