Date of Award

5-10-2017

Degree Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Department

Risk Management and Insurance

First Advisor

Glenn W. Harrison

Second Advisor

Stephen Shore

Third Advisor

Alejandro Del Valle

Fourth Advisor

Daniel J. Clarke

Abstract

This thesis uses laboratory experiments to develop a methodology to estimate the expected welfare benefits of insurance for individuals, conditional on their risk preferences. This methodology is then applied to study the welfare effects of issues that impact microinsurance, or insurance for the poor. The first result is that insurance take-up not a good proxy for the expected welfare gain of an individual’s choice to purchase or not to purchase insurance. The second result is that basis risk reduces the welfare obtained from index insurance. This welfare is significantly improved by having greater behavioral consistency with the Reduction of Compound Lotteries axiom. Finally, the risk of contract non-performance from the insurer significantly reduces the welfare obtained from insurance purchase decisions.

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