Experimental markets for insurance
- Cite this article as:
- Camerer, C. & Kunreuther, H. J Risk Uncertainty (1989) 2: 265. doi:10.1007/BF00209390
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This article extends the large amount of research on double-oral auction markets to hazards that produce only losses. We report results from a series of experiments in which subjects endowed with low-probability losses can pay a premium for insurance protection. Insurers specify the price at which they are willing to assume the risk of a loss. Insurance prices approach expected value for a large range of probabilities and loss amounts. Subjects seem to realize losses are statistically independent. Prices are not affected by ambiguity about the probability of loss.