Premium
IMPACT OF OUTCOME AMBIGUITY ON SELF‐INSURANCE AND SELF‐PROTECTION: EXPERIMENTAL EVIDENCE
Author(s) -
Ozdemir Ozlem
Publication year - 2017
Publication title -
bulletin of economic research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.227
H-Index - 29
eISSN - 1467-8586
pISSN - 0307-3378
DOI - 10.1111/boer.12111
Subject(s) - ambiguity , outcome (game theory) , valuation (finance) , economics , actuarial science , ambiguity aversion , econometrics , microeconomics , computer science , finance , programming language
This experimental study examines and compares individual valuations of the two risk reduction mechanisms: self‐insurance and self‐protection in risky versus ambiguous outcome situations. Results confirm that individuals do not perceive these mechanisms differently under risk. Moreover, ambiguity in the outcome (i.e., size of loss) affects valuations weakly, and changing representations of ambiguity do not alter valuation. In general, individuals are found to be ambiguity averse for low sizes of loss and ambiguity neutral for high sizes of loss, regardless of the probability of loss. Finally, no strong support is found for any particular model of ambiguity.