NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Catherine Guirkinger

Repart de la vierge 8
5000 Namur
Belgium

E-Mail: catherine.guirkinger@unamur.be
Institutional Affiliation: CRED, University of Namur

NBER Working Papers and Publications

September 2018Insurance Contracts when Individuals “Greatly Value” Certainty: Results from a Field Experiment in Burkina Faso
with Elena Serfilippi, Michael Carter: w25026
In discussing the paradoxical violation of expected utility theory that now bears his name, Maurice Allais noted that individuals tend to “greatly value” payoffs that are certain. Allais' observation would seem to imply that people will undervalue insurance relative to the predictions of expected utility theory because as conventionally constructed, insurance offers an uncertain benefit in exchange for a certain cost that certainty-loving individuals will overvalue. Pursuing this logic, we implemented insurance games with cotton farmers in Burkina Faso. On average, farmer willingness to pay for insurance increases significantly when a premium rebate framing is used to render both costs and benefits of insurance uncertain. We show that the impact of the rebate frame on the willingness to pa...
 
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