WP 2015

WP 2015-13 The Methodologies of Behavioral Insurance: Introduction to the Special Issue

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Published in 2016 in The Journal of Risk and Insurance, Volume 83, Issue 1.

ABSTRACT: The generic insurance product involves an agent giving up a certain amount of money ex ante some risky event in the expectation of being given some money in the future if something unfortunate occurs. It is immediate… more »

WP 2015-12 Preferences over Risky Aid

Posted On November 9, 2015
Categories Working Papers, WP 2015

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ABSTRACT: Understanding decisions in situations involving multiple risks is important in many contexts, including the provision of aid to developing countries. Aid typically involves trade-offs over multiple, desirable, but risky outcomes. We partner with an aid organisation and design a laboratory experiment to investigate multi-attribute risk preferences in the context of donations… more »

WP 2015-11 Risk Preferences, Time Preferences and Smoking Behavior

Posted On September 8, 2015
Categories Working Papers, WP 2015

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ABSTRACT: There is a rich theoretical literature in economics which models habit-forming behaviours, of which addiction is the exemplar, but there is a paucity of experimental economic studies eliciting and comparing the preferences that economic theory suggests may differ between addicts and non-addicts. We evaluate a set of incentive compatible risk and… more »

WP 2015-10 Evaluating the Expected Welfare Gain from Insurance

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Published in 2016 in The Journal of Risk and Insurance, Volume 83, Issue 1.

ABSTRACT: Economic theory tells us how to evaluate the expected welfare gain from insurance products on offer to individuals. If we know the risk preferences of the individual, and subjective beliefs about loss contingencies and likelihood of payout,… more »

WP 2015-09 Empirical Likelihood Inference for Haezendonck-Goovaerts Risk Measure

Posted On July 13, 2015
Categories Working Papers, WP 2015

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Abstract. Recently Haezendonck-Goovaerts risk measure is receiving much attention in actuarial science with applications in the study of optimal portfolio and optimal reinsurance policy. Nonparametric estimation is proposed by Ahn and Shyamalkumar (2014), where the derived asymptotic limit can be employed to construct an interval for the Haezendonck-Goovaerts risk measure. In this… more »

WP 2015-08 The Effect of Information System Precision on Honesty in Managerial Reporting: An Experimental Examination Incorporating Operating Uncertainty

Posted On June 29, 2015
Categories Working Papers, WP 2015

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ABSTRACT: We apply insights from a model of social norm activation to an agency model of capital budgeting to develop a positive behavioral relation between information system precision and honesty in managerial reporting. This relation is based on the ability of a precise information system to reduce information asymmetry between the owner and… more »

WP 2015-07 What Drives Tort Reform Legislation? An Analysis of State Decisions to Restrict Liability Torts

Posted On June 8, 2015
Categories Working Papers, WP 2015

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ABSTRACT: This paper studies the timing of state-level tort reform enactments between 1971 and 2005. Using discrete time hazard models, we find the level of litigation activity—as measured by incurred liability insurance losses, the number of lawyers, and tort cases commenced—to be the most important and robust determinant of tort reform adoption.… more »

WP 2015-06 Capital, Systemic Risk, Insurance Prices and Regulation

Posted On April 17, 2015
Categories Working Papers, WP 2015

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We develop a unified equilibrium model of competitive insurance markets that incorporates the demand and supply of insurance as well as insurers’ asset and liability risks. Insurers’ assets may be exposed to both idiosyncratic and systemic shocks. We obtain new insights into the relationship between insurance premia and insurers’ internal capital that… more »

WP 2015-05 Information Characteristics and Errors in Expectations: Experimental Evidence

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Forthcoming – Journal of Financial and Quantitative Analysis

ABSTRACT: The behavioral biases documented in psychology are not always robust when tested in economic conditions. We design an experiment to test the hypothesis that, in violation of Bayes Rule, some people respond more forcefully to the strength of an information signal than… more »