Seminari Theory-Experimental

Ricardo Serrano Padial

Drexel University

10-Jun-2019

Seminar 3 – 14:30

Resum

We study the relationship between risk, information and risk preferences using a lab and a field experiment on insurance choice with a representative sample of more than 4,000 individuals. We have three major findings: 1) willingness to pay for insurance is higher in settings with more complex or ambiguous information; 2) both risk aversion and aversion to complex or ambiguous information are decreasing in underlying risk; and 3) risk aversion and aversion to complex or ambiguous information are negatively correlated, with the correlation coefficient being remarkably invariant to underlying risk and sociodemographic characteristics. We use demand simulation techniques to illustrate how informational effects can bias the empirical estimation of risk preferences from insurance choice data, and have a large impact on the allocative efficiency of insurance markets.

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