Risk attitudes play a pivotal role to understand economic decision‐making, and several measures are used to elicit them in the lab and survey them in the field. We provide a literature review on the most commonly used risk elicitation methods by Holt and Laury (HL) and the Investment Game (IG)...

This paper studies insurance demand for individuals with limited financial literacy. We propose uncertainty about insurance payouts, resulting from contract complexity, as a novel channel that affects decision-making of financially illiterate individuals. Then, a trade-off between second-order...

Economic decisions frequently entail choices in the presence of risk. Decisions to purchase insurance, to save, to invest, and to pursue an education are all choices that may involve some degree of risk, just to name a few. We analyze the impact of changes in family structure on individuals'...

Utilizing the longitudinal SOEP data representative of the German population, we find that mental health shocks significantly decrease the willingness to take risks. We also find that mental health improvements increase the willingness to take risks significantly. Our findings are relevant for...

We analyze insurance demand when insurable losses come with an uninsurable zero‐mean background risk that increases in the loss size. If the individual is risk vulnerable, loss‐dependent background risk triggers a precautionary insurance motive and increases optimal insurance demand....