Opening up the black box: Technological transparency and prevention

Lu Li

Journal of Risk & Insurance, 2021, vol. 88, issue 3, 665-693

Abstract: We discuss the behavioral and welfare implications of uncovering determinants of successful prevention. Based on a novel reinterpretation of prevention, we introduce the concept of technological transparency (TT)—the extent to which scientific knowledge allows agents to predict the success of their effort conditional on observable risk determinants. When risk determinants are observable ex ante, TT refines the information partition and induces more efficient prevention but does not necessarily improve welfare when the risk is insurable. At the same time, TT may harm welfare if information is incompletely disclosed. When risk determinants are only observable ex post, TT may increase effort by triggering future regret. Our framework facilitates a deeper understanding of the connection between knowledge and the efficient choice of preventive effort. Our findings inform the cost‐benefit analysis of advancing knowledge about risk processes, as well as the effective disclosure of such knowledge to the public.

Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://doi.org/10.1111/jori.12328

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jrinsu:v:88:y:2021:i:3:p:665-693

Ordering information: This journal article can be ordered from
http://www.wiley.com/bw/subs.asp?ref=0022-4367

Access Statistics for this article

Journal of Risk & Insurance is currently edited by Joan T. Schmit

More articles in Journal of Risk & Insurance from The American Risk and Insurance Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().