Regret, rejoicing, and mixed insurance

Yoichiro Fujii, Mahito Okura, Yusuke Osaki

Research output: Contribution to journalArticle

3 Citations (Scopus)

Abstract

This study examines how regret and rejoicing affect mixed insurance choice and demand. In contrast to expected utility theory, regret and rejoicing may explain why some individuals prefer to hold mixed insurance rather than term insurance. In this study, we derive the conditions under which an individual prefers to hold mixed insurance rather than term insurance. We also study demand for mixed insurance and specify the factors that influence the demand motive. The demand motive is determined by the risk effect and the rejoicing effect, when the rejoicing effect dominates the risk effect, under-insurance is optimal, and vice versa.

Original languageEnglish
Pages (from-to)126-132
Number of pages7
JournalEconomic Modelling
Volume58
DOIs
Publication statusPublished - 2016 Nov 1
Externally publishedYes

Keywords

  • Full insurance
  • Mixed insurance
  • Regret
  • Rejoicing

ASJC Scopus subject areas

  • Economics and Econometrics

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