Award Date

5-1-2015

Degree Type

Thesis

Degree Name

Master of Arts (MA)

Department

Economics

First Committee Member

Mary Riddel

Second Committee Member

Stephen P. Brown

Third Committee Member

Hokwon Cho

Fourth Committee Member

Jeffrey Butler

Number of Pages

98

Abstract

Spinnewijn (2013) posits that optimism about risk and the efficacy of risk-reducing effort could cause selection in insurance markets. We test for this using a survey of 474 subjects’ demand for hypothetical cancer insurance. We elicit perceptions of baseline cancer risk and control efficacy and combine these with subject-specific cancer risks predicted by the Harvard Cancer Risk Index to develop measures of baseline and control optimism. We find that only 23 percent of our subjects would purchase a fair insurance contract aligned to their true risk type. Of these subjects, 94 percent also overinvest in prevention, leading to advantageous selection.

Keywords

Adverse Selection; Cancer insurance; Insurance; Insurance Markets; Risk (Insurance); Risk Misperception; Risk perception; Risk-taking (Psychology)

Disciplines

Economics | Insurance | Psychology

Language

English


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