Does having insurance change individuals' self-confidence?
- Author(s)
- Raphael Guber, Martin Kocher, Joachim Winter
- Abstract
Recent research in contract theory on the effects of behavioral biases implicitly assumes that they are stable, in the sense of not being affected by the contracts themselves. In this paper, we provide evidence that this is not necessarily the case. We show that in an insurance context, being insured against losses that may be incurred in a real-effort task changes subjects' self-confidence. Our novel experimental design allows us to disentangle selection into insurance from the effects of being insured by randomly assigning coverage after subjects revealed whether they want to be insured or not. We find that uninsured subjects are underconfident while those that obtain insurance have well-calibrated beliefs. Our results suggest that there might be another mechanism through which insurance affects behavior than just moral hazard.
- Organisation(s)
- Department of Economics, Vienna Center for Experimental Economics
- External organisation(s)
- Max-Planck-Gesellschaft, Ludwig-Maximilians-Universität München
- Journal
- Journal of Risk and Insurance
- Volume
- 88
- Pages
- 429-442
- No. of pages
- 14
- ISSN
- 0022-4367
- DOI
- https://doi.org/10.1111/jori.12319
- Publication date
- 06-2021
- Peer reviewed
- Yes
- Austrian Fields of Science 2012
- 502057 Experimental economics, 502036 Risk management
- Keywords
- ASJC Scopus subject areas
- Economics and Econometrics, Accounting, Finance
- Portal url
- https://ucris.univie.ac.at/portal/en/publications/does-having-insurance-change-individuals-selfconfidence(bfb71550-1def-4aea-b1c1-d8f10c3dfec2).html