Moral Hazard, Risk Seeking, and Free Riding
AbstractThis article reports on a laboratory study of moral hazard in insurance markets. The experimental literature or the provision of public goods suggests that agents often sacrifice their narrowly defined self-interest for the good of the group. However, in those experiments, losses are deterministic. We find cooperation in experiments with stochastic losses to be much lower than in otherwise identical experiments with deterministic losses. We argue that the combination of risk seeking and free riding under stochastic returns to investment in loss control makes moral hazard particularly problematic for insurance markets. Copyright 1994 by Kluwer Academic Publishers
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Bibliographic InfoArticle provided by Springer in its journal Journal of Risk and Uncertainty.
Volume (Year): 9 (1994)
Issue (Month): 2 (October)
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Web page: http://www.springerlink.com/link.asp?id=100299
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- Nicholas E. Burger & Charles D. Kolstad, 2009. "Voluntary Public Goods Provision, Coalition Formation, and Uncertainty," NBER Working Papers 15543, National Bureau of Economic Research, Inc.
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