Asymmetric information and insurance: An experimental approach

Fredrick Bedsworth, Daniel R. Neal, Javier E. Portillo and Kevin Willardsen

Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), 2021, vol. 92, issue C

Abstract: Separate identification of moral hazard and adverse selection in insurance markets is empirically difficult. To overcome this limitation, this paper develops a series of controlled laboratory experiments to examine how adverse selection and moral hazard separately affect agent performance in a real-effort task. We explore how agent performance changes across a baseline with no insurance option, a treatment where individuals can choose to purchase insurance, and a third treatment where individuals must purchase insurance. We believe our experimental design can be used as a wind-tunnel that is flexible enough to incorporate alternative price changes or contract designs while permitting researchers to separately identify moral hazard and adverse selection under those conditions.

Keywords: Experiments; Insurance; Adverse selection; Moral hazard (search for similar items in EconPapers)
JEL-codes: C9 D82 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:soceco:v:92:y:2021:i:c:s2214804321000367

DOI: 10.1016/j.socec.2021.101696

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