Monday, December 5, 2022
HomeHealth InsuranceEmpirical Estimates – Healthcare Economist

Empirical Estimates – Healthcare Economist

What would you favor:

  • Choice A: Flip a coin with the place if it lands heads you win $20 but when it lands on tails you get $0
  • Choice B: Win $10 for sure

In the event you want choice A, you’re danger loving; when you want choice B you’re danger averse. If you’re detached between these selections you’re danger impartial. A key query is, what share of people have these preferences and the way sturdy are these preferences. As an example, a danger impartial particular person could want Choice B up till the knowledge equal was $8, then they could change to Choice A. A very danger averse particular person could want Choice B till it was lowered to $5, and solely then want Choice A.

One solution to measure the energy of those preferences is with a metric often called relative danger aversion.

A paper by Outreville (2014) gives an outline of some papers than intention to estimate relative danger aversion empirically. We discover a variety of RRA estimates.


We see that sure methodologies produce increased relative danger aversion estimates than others. Information collected from surveys and sport reveals produced comparable estimates of danger aversion; estimates of relative danger aversion based mostly on monetary selections and insurance coverage purchases present a lot increased ranges of danger aversion.

The paper gives extra element on how relative danger aversion varies throughout completely different particular person traits (e.g., training, wealth, gender) and is value a learn.



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