Willingness to Pay for Firm Reputation: Paying for Risk Rating in the Annuity Market

Alcalde, Pilar and Vial, Bernardita (2016): Willingness to Pay for Firm Reputation: Paying for Risk Rating in the Annuity Market.

Abstract

In this paper we test the existence of a reputation premium in the context of the annuity market in Chile. This market provides an exceptionally good setting to measure consumers’ willingness to pay: retirees choose between a set of offers that vary only in the quote and the risk rating –a measure of the firm’s solvency– within each class of product. We find that willingness to pay for the reputation linked to the firm’s risk rating is statistically and economically significant. We also find a strong relationship between willingness to pay and intermediary choice, and we explore four potential sources of correlation between them.

• Item Type: MPRA Paper
• Language: English
• Keywords: reputation premium, willingness to pay, demand estimation, annuity markets
• Subjects: D - Microeconomics > D1 - Household Behavior and Family Economics > D12 - Consumer Economics: Empirical Analysis; D - Microeconomics > D5 - General Equilibrium and Disequilibrium > D53 - Financial Markets; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L14 - Transactional Relationships ; Contracts and Reputation ; Networks

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