As emprical studies show, the policyholders' willingness to pay depends on the security level of the insurance cover. The choice of the security level determines the capital budgeting decision and therefore the cost of capital, as well as the attainable insurance premiums. We call this cost of...

There is a large literature showing that willingness-to-accept (WTA) is usually much higher than willingness-to-pay (WTP) in empirical studies although they should be roughly equal according to traditional economic theory. A second stream of literature shows that people are typically ambiguity...