Excerpt
Excerpt
Measuring Ex-Ante Welfare in Insurance Markets. Nathaniel Hendren, October 2016, Paper, "Insurance has value by insuring against the realization of risk. Adverse selection occurs when a portion of this risk is already known at the time of contracting. This suggests demand estimates in adversely selected markets tend to understate the ex-ante (or ex-post utilitarian) willingness to pay for insurance. This paper provides new reduced-form methods to infer the ex-ante value of insurance from observed demand and cost curve estimates in markets with adverse selection. The slope of the demand and cost curves measure the quantity of information revealed; by combining with internal or external measures of risk aversion, one obtains exante measures of willingness to pay. Applying the model to existing estimates in health and unemployment insurance contexts," Paper - Link, Slides - Link