A note on quasi-hyperbolic discounting, risk aversion, and the demand for insurance

Mathias Kifmann (), Kerstin Roeder () and Clarissa Schumacher ()
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Mathias Kifmann: University of Hamburg
Clarissa Schumacher: University of Augsburg

Economics Bulletin, 2014, vol. 34, issue 2, 772-783

Abstract: We show that quasi-hyperbolic discounting not only affects savings decisions but also the demand for insurance. In general, insurance demand by quasi-hyperbolic discounters is time-inconsistent. Without liquidity constraints they buy more insurance than initially planned. In the presence of binding liquidity constraints, hyperbolic discounters tend to revise their insurance demand downwards.

Keywords: Insurance demand; quasi-hyperbolic discounting; liquidity constraints; risk aversion (search for similar items in EconPapers)
JEL-codes: D1 D9 (search for similar items in EconPapers)
Date: 2014-04-23
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