Narrow Framing and Long-Term Care Insurance

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Wharton Pension Research Council Working Papers
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Behavioral Economics
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Gottlieb, Daniel
Mitchell, Olivia S
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We propose a model of narrow framing in insurance and test it using data from a new module we designed and fielded in the Health and Retirement Study. We show that respondents subject to narrow framing are substantially less likely to buy long-term care insurance than average. This effect is distinct from, and much larger than, the effects of risk aversion, or adverse selection, and it offers a new explanation for why people underinsure their later-life care needs.

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2015-03-01
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