The recipients of the 2021 Witt Award were Daniel Gottlieb and Olivia Mitchell for “Narrow Framing and Long-Term Care Insurance,” December 2020, Volume 87, Issue 4, pages 861-893.
Abstract
We propose a model of narrow framing in insurance and test it using data from a new module we designed and fielded in the Health and Retirement Study. We show that respondents subject to narrow framing are substantially less likely to buy long-term care insurance than average. This effect is much larger than the effects of risk aversion or adverse selection, and it offers a new explanation for why people underinsure their later-life care needs.