Year: 2006
Type: report
Abstract: Protective decisions are often puzzling.Among other anomalies, people insure against non-catastrophic events, underinsure against catastrophic risks, and allow extraneous factors to influence insurance purchases and other protective decisions.Neither expected utility theory nor prospect theory can explain these anomalies satisfactorily.We propose a constructed-choice model for general decision making.The model departs from utility theory and prospect theory in its treatment of multiple goals and it suggests several different ways in which context can affect choice.To apply this model to the above anomalies, we consider many different insurance-related goals, organized in a taxonomy, and we consider the effects of context on goals, resources, plans and decision rules.The paper concludes by suggesting some prescriptions for improving individual decision making with respect to protective measures.
DOI: 10.3386/w12446
Authors: David Krantz, Howard Kunreuther
Institutions: Columbia University, University of Pennsylvania
Language: English
Subfield: General Decision Sciences
Field: Decision Sciences
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2097589613