Exhibit - Celebration of Undergraduate Research and Creative Activity: Information Cascades and Insurance Demand

 

Information Cascades and Insurance Demand

Presenter Information

Seth WorkmanFollow

Start Date

April 2025

Location

MCD 208

Abstract

Insurance markets are susceptible to information cascades if decisions are made using the public information of peer insurance purchases. Given an individual’s risk of loss is challenging to comprehend, insurance buyers may learn whether their peers have purchased the same insurance. A cascade may form, for example, if I forgo insurance because all of my neighbors have also declined insurance, even though my private information suggests I should buy it. Using a laboratory experiment, we investigate whether information cascades form in insurance markets under two scenarios: when risks are correlated and uncorrelated. We also study whether the strength of information cascades in insurance depends upon the perceived relative risk preferences of the reference-peer: compared to me, are they a risky person or safe person?

This document is currently not available here.

Share

COinS
 
Apr 23rd, 3:15 PM Apr 23rd, 3:30 PM

Information Cascades and Insurance Demand

MCD 208

Insurance markets are susceptible to information cascades if decisions are made using the public information of peer insurance purchases. Given an individual’s risk of loss is challenging to comprehend, insurance buyers may learn whether their peers have purchased the same insurance. A cascade may form, for example, if I forgo insurance because all of my neighbors have also declined insurance, even though my private information suggests I should buy it. Using a laboratory experiment, we investigate whether information cascades form in insurance markets under two scenarios: when risks are correlated and uncorrelated. We also study whether the strength of information cascades in insurance depends upon the perceived relative risk preferences of the reference-peer: compared to me, are they a risky person or safe person?