Decision Making under Ignorance and Product Disclosure: Implications in Buying Insurance

Mendes-Da-Silva, Wesley; Gattaz, Cristiane C.; Gibson, David V.

doi:10.7819/rbgn.v23i4.4130

Wesley Mendes-Da-Silva

Escola de Administração de Empresas de São PauloFundação Getulio VargasSão PauloBrazil

Authors: 1. Wesley Mendes-Da-Silva, Associate Professor, Escola de Administração de Empresas de São Paulo da Fundação Getulio Vargas (FGV/EAESP), São Paulo, Brazil. mr.mendesdasilva@gmail.com.

http://orcid.org/0000-0002-5500-4872

Cristiane C. Gattaz

University of Texas at AustinIC InstituteAustinTexasUnited States of America

2. Cristiane C. Gattaz, Researcher Affiliated with the IC2 Institute, University of Texas at Austin, Austin, United States. cristiane.gattaz@utexas.edu.

http://orcid.org/0000-0003-4603-3441

David V. Gibson

University of Texas at AustinIC InstituteAustinTexasUnited States of America

3. David V. Gibson, Full Professor, University of Texas at Austin, Austin, United States. davidg@ic2.utexas.edu.

http://orcid.org/0000-0002-1733-503X

Responsible Editor:

Prof. Dr. Sebastian Molinillo

Reviewers:

Solon Bevilacqua; Marcelo Santos Amaral

Conflicts of interest:

The authors have no conflict of interest to declare.

Authors:

1. Wesley Mendes-Da-Silva, Associate Professor, Escola de Administração de Empresas de São Paulo da Fundação Getulio Vargas (FGV/EAESP), São Paulo, Brazil. mr.mendesdasilva@gmail.com.

2. Cristiane C. Gattaz, Researcher Affiliated with the IC² Institute, University of Texas at Austin, Austin, United States. cristiane.gattaz@utexas.edu.

3. David V. Gibson, Full Professor, University of Texas at Austin, Austin, United States. davidg@ic2.utexas.edu.

Authors' Contributions:

Wesley Mendes-Da-Silva: Definition of research problem; Development of hypotheses or research questions (empirical studies); Definition of methodological procedures; Data Collection; Literature review; Statistical analysis; Analysis and interpretation of data; Critical revision of the manuscript; Manuscript writing.

Cristiane Chaves Gattaz: Definition of research problem; Development of hypotheses or research questions (empirical studies); Definition of methodological procedures; Literature review; Analysis and interpretation of data; Critical revision of the manuscript; Manuscript writing.

David V. Gibson: Literature review; Statistical analysis; Analysis and interpretation of data; Critical revision of the manuscript; Manuscript writing.

		Stage #1 (Ignorance)			Stage #2 (Risk)
Equipment		Product reliability			Product reliability
	Price(a)	Low		High	Low		High
Refrigerator (N = 64)	5%	46.91		50.00	44.55		53.33
Refrigerator (N = 64)	10%	39.21		25.00	35.56		35.00
			42.12†			42.10^†
Television (N = 53)	5%	40.00		31.00	41.67		20.00
Television (N = 53)	10%	48.75		24.29	41.09		40.45
			33.71^†			38.30^†
Washer Dryer (N = 66)	5%	57.92		43.57	50.00		44.17
Washer Dryer (N = 66)	10%	41.35		25.78	37.27		35.89
			39.41^†			40.91^†
PC (N = 66)	5%	57.50		41.29	63.33		39.17
PC (N = 66)	10%	34.55		28.85	43.64		25.00
			39.02^†			39.32^†

		Stage #1 (Risk)			Stage #2 (Ignorance)
		Product reliability			Product reliability
Equipment	Price(a)	Low		High	Low		High
Refrigerator (N = 46)	5%	36.67		19.75	44.52		48.33
Refrigerator (N = 46)	10%	32.92		11.00	45.35		32.60
			33.02^†			43.78†
Television (N = 43)	5%	44.32		31.83	43.57		40.70
Television (N = 43)	10%	46.82		45.89	37.94		33.33
			41.80^†			39.41^†
Washer Dryer (N = 48)	5%	46.75		36.15	38.23		32.33
Washer Dryer (N = 48)	10%	34.80		32.38	46.63		32.78
			36.89^†			36.47^†
PC (N = 47)	5%	55.67		35.19	50.00		35.64
PC (N = 47)	10%	32.00		47.42	30.20		30.00
			39.27^†			33.75^†

$\Pr B u y i n g W a r r a n t y_{i j} = β_{0} + β_{1} \Pr B r e a k i n g_{i j} + β_{2} R e p a i r C o s t_{i j} + β_{3} P r e m i u m_{i j} + ε_{i j}$
		t statistic
	Stage	Repair Cost		Probability of Breaking		Cost of Insurance		R2	F
Panel A: Experiment #1
Refrigerator	Stage 1 (Ignorance)	2.78	***	0.68		-1.92	*	0.116	**
	Stage 2 (Risk)	1.72	*	2.68	**	-1.57		0.212	**
TV	Stage 1 (Ignorance)	3.85	***	3.26	***	-0.81		0.402	***
	Stage 2 (Risk)	2.77	***	4.49	***	0.02		0.327	***
Washer Dryer	Stage 1 (Ignorance)	1.52		1.57		-1.94	*	0.129	***
	Stage 2 (Risk)	2.02	**	4.83	***	-0.16		0.384	***
PC	Stage 1 (Ignorance)	2.40	**	0.87		-1.92	*	0.095	**
	Stage 2 (Risk)	2.23	**	3.98	***	-1.62		0.235	***
Panel B: Experiment #2
Refrigerator	Stage 1 (Risk)	2.53	**	-0.98		0.50		0.095	*
	Stage 2 (Ignorance)	2.24	**	2.58	**	-0.90		0.209	***
TV	Stage 1 (Risk)	-0.22		0.25		0.63		-0.056
	Stage 2 (Ignorance)	0.71		1.58		-0.63		-0.005
Washer Dryer	Stage 1 (Risk)	1.95	*	0.81		-1.04		0.036
	Stage 2 (Ignorance)	1.44		2.51	**	0.46		0.101	*
PC	Stage 1 (Risk)	0.94		0.54		0.81		-0.034
	Stage 2 (Ignorance)	0.08		2.00	*	-1.01		0.039

Arguments	Experiment #1		Experiment #2
	Ignorance	Risk	Ignorance	Risk
Panel A: Reasons to buy a warranty
Meta-arguments:
I usually buy these types of warranties	3.03	2.81	3.40	3.24
I would regret not having bought the warranty if the equipment were to break	6.38	5.61	5.19	4.90
I would sleep better if I had the warranty	4.08	3.84	5.45	3.59
I am unlucky. My products always break	2.53	2.84	2.34	2.71
Non-meta-arguments:
The cost of the warranty is relatively low compared to the product’s price	5.26	5.42	4.66	4.74
The cost of repairing (or exchanging) would be much greater than the cost of the warranty	6.39	6.32	7.50	6.07
The warranty is not expensive	5.27	5.55	4.40	4.90
This type of product breaks easily	5.12	5.12	4.16	5.19**
Even though the risk of a loss appears low, I don’t want to be responsible for it	4.91	4.36	3.79	3.98
The cost of the warranty is not high compared to the chance of something going wrong	5.86	5.89	4.71	5.59*
This product is very valuable to me	6.08	6.53	6.17	6.05

Panel B: Reasons to not buy a warranty
Meta-arguments:
I am lucky. My electronic equipment does not break	4.30	4.08	4.62	3.76
I do not believe in insurance and warranties. They do not always cover everything and there is a lot of bureaucracy	5.55	5.46	4.86	4.79
I usually do not buy warranties of this type	5.30	5.19	5.45	5.31
I would regret spending money to buy a warranty if the equipment did not break	6.07	5.61	5.66	5.53
Non-meta-arguments:
The product is a type that rarely breaks	7.12	7.07	5.62	5.81
The warranty is expensive compared to the product’s price	6.31	6.38	5.43	5.84
This product is not that valuable to me	5.73	5.81	3.95	4.60
The cost of the warranty is high compared to the chance of something going wrong	6.53	6.42	5.41	6.05
The warranty’s price is high	6.80	6.70	5.71	6.40

[1] Responsible Editor:

Prof. Dr. Sebastian Molinillo

Brasil

Brasil

Decision Making under Ignorance and Product Disclosure: Implications in Buying Insurance

Abstract

Purpose

Theoretical framework

Design/methodology/approach

Findings

Practical & social implications of research

Originality/value