Impact of personality traits and risk attitude on individual response: an experimental evidence

Dinç, Özge
The present study aims to contribute to insurance sector by investigating the risk reduction mechanisms: self-insurance, self-protection, and market insurance. First, individual valuations/demands for these mechanisms in fire and earthquake events are analyzed through conducting an experiment to 78 students from Middle East Technical University In addition, the effects of risk attitude, personality traits, and demographic variables (that are measured through using a questionnaire) on valuations to these precautionary actions’ are examined. The findings show that, consistent with the theory, self-insurance and market insurance are substitutes to each other; contrary to the theory, self-protection and market insurance are not complements, they are also substitutes to each other. Further, individuals prefer self-protection and self-insurance to market insurance for both fire and earthquake events. Lastly, individual investment attitude is found to affect the valuations of these three risk reduction mechanisms positively concluding that people perceive these mechanisms as an investment tool.