期刊
MANAGEMENT SCIENCE
卷 67, 期 8, 页码 4742-4755出版社
INFORMS
DOI: 10.1287/mnsc.2020.3768
关键词
almost stochastic dominance; generalized almost second-degree stochastic dominance; preference parameter; automobile theft insurance; deductible
资金
- Ministry of Science and Technology (MOST) [107-2410-H-008-068]
- E.SUN Commercial Bank
- MOST [107-2410-H-008-068, 108-2410-H-001-039MY3, 108-3017-F-002003, 109-2634-F-002-045]
- Center for Research in Econometric Theory and Applications from The Featured Areas Research Center Program [109L9002]
This study estimates the acceptable violation ratio of stochastic dominance rules using real-world data on deductible choices in automobile theft insurance, finding that most policyholders accept a very small violation ratio, close to zero.
Knowing how small a violation of stochastic dominance rules would be accepted by most individuals is a prerequisite to applying almost stochastic dominance criteria. Unlike previous laboratory-experimental studies, this paper estimates an acceptable violation of stochastic dominance rules with 939,690 real world data observations on a choice of deductibles in automobile theft insurance. We find that, for all policyholders in the sample who optimally chose a low deductible, the upper bound estimate of the acceptable violation ratio is 0.0014, which is close to zero. On the other hand, considering that most decision makers, such as 99% (95%) of the policyholders in the sample, optimally chose the low deductible, the upper bound estimate of the acceptable violation ratio is 0.0405 (0.0732). Our results provide reference values for the acceptable violation ratio for applying almost stochastic dominance rules.
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