Abstract
It has been argued that individuals behave according to a threshold level of concern decision rule when considering protection against risk: if the perceived probability of the risk is below a threshold level, then the likelihood of the risk is treated as zero and protection is deemed unnecessary. Little is known about the determinants of this threshold nor about whether individual thresholds are related to risk specific emotions like worry and regret. We study threshold probabilities and factors that influence these in the context of flood insurance decision making. Based on data collected from 1,041 Dutch homeowners, we find that on average the threshold level of concern for flood insurance demand is negatively related to the expected regret an individual might feel about not purchasing flood insurance if a flood occurs, as well as to worry about flooding.
| Original language | English |
|---|---|
| Pages (from-to) | 237-245 |
| Number of pages | 9 |
| Journal | Judgment and Decision Making |
| Volume | 13 |
| Issue number | 3 |
| Publication status | Published - May 2018 |
Funding
We thank the editor Jonathan Baron for helpful comments on the paper and suggestions regarding the statistical analysis. Howard Kunreuther and one anonymous referee provided useful suggestions for the paper. We are grateful to Jantsje Mol for helping with the translation of the experiment instructions. This research was supported by the Netherlands Organisation for Scientific Research (NWO), Vidi grant number 45214005. Copyright: © 2018. The authors license this article under the terms of the Creative Commons Attribution 3.0 License. ∗Institute for Environmental Studies, VU University, Amsterdam, The Netherlands. Email: [email protected]. †Institute for Environmental Studies, VU University, Amsterdam, The Netherlands. Utrecht University School of Economics (U.S.E.), Utrecht University, Utrecht, The Netherlands. Risk Management and Decision Processes Center, The Wharton School, University of Pennsylvania, Philadelphia, USA.
| Funders | Funder number |
|---|---|
| Netherlands Organization for Scientific Research | |
| Nederlandse Organisatie voor Wetenschappelijk Onderzoek | 45214005 |
Keywords
- Anticipated emotion
- Anticipatory emotion
- Flood insurance demand
- Risk perceptions
- Threshold level of concern
