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Do bad risks know it? Experimental evidence on optimism and adverse selection

  • Coelho, Marta
  • de Meza, David

Subjects who overestimate their performance in experimental tasks unrelated to travel are less willing to insure against failing in the task and also less inclined to buy travel insurance. This suggests intrinsic optimism influences insurance demand and diminishes adverse selection.

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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 114 (2012)
Issue (Month): 2 ()
Pages: 168-171

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Handle: RePEc:eee:ecolet:v:114:y:2012:i:2:p:168-171
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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  11. de Meza, David & Webb, David C, 2001. "Advantageous Selection in Insurance Markets," RAND Journal of Economics, The RAND Corporation, vol. 32(2), pages 249-62, Summer.
  12. Brown, Keith C, 1974. "A Note on the Apparent Bias of Net Revenue Estimates for Capital Investment Projects," Journal of Finance, American Finance Association, vol. 29(4), pages 1215-16, September.
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