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Product-Consumer Substitution and Safety Regulation: Theory and Evidence from Simulation

Konrad Grabiszewski, Alex Horenstein () and Nicolo Bates
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Konrad Grabiszewski: University of Miami
Nicolo Bates: University of Miami

No 2016-05, Working Papers from University of Miami, Department of Economics

Abstract: We develop a novel theory of safety regulation that incorporates both moral hazard and adverse selection. We test our theory using unique data from more than 2 million observations obtained from iRacing, an online racing simulation. Our theory provides new explanations of phenomena studied in the literature. We offer novel policy implications; in particular, we introduce the concept of two-dimensional regulation.

Keywords: safety regulation; adverse selection; moral hazard Publication Status: Under Review (search for similar items in EconPapers)
JEL-codes: D8 K2 L5 (search for similar items in EconPapers)
Date: 2016-10-01
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