The value of choice in insurance purchasing

Does having a choice increase the willingness to pay for what is chosen? In web experiments, we find that individuals are willing to pay more for a hypothetical insurance policy when they are told that they will be able to choose than when they are presented the same policy as the only option. We propose that a chosen good when presented alongside a worse good is valued higher than the same good offered alone. We control for the information effect of the additional option. Our results suggest that enrollment in insurance plans could be increased by making decisions look like choices, and that similar results may be found in other choice situations. (c) 2007 Elsevier B.V. All rights reserved.