Asymmetric Information and Insurance: An Experimental Approach

Authors

Fredrick Bedsworth, Saint Anselm College
Javier E. Portillo, University of Louisiana at Lafayette
Daniel R. Neal, Florida State University
Kevin Willardsen, Wright State University - Main CampusFollow

Document Type

Article

Publication Date

6-1-2021

Identifier/URL

40975878 (Pure)

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.

Comments

Publisher Copyright: © 2021

Repository Citation

Bedsworth, F., Portillo, J. E., Neal, D. R., & Willardsen, K. (2021). Asymmetric Information and Insurance: An Experimental Approach. Journal of Behavioral and Experimental Economics, 92.
https://corescholar.libraries.wright.edu/econ/323

DOI

10.1016/j.socec.2021.101696