The Empirical Measure of Information Problems with Emphasis on Insurance Fraud and Dynamic Data

Handbook of Insurance, Second Edition, 423-448, 2014

50 Pages Posted: 23 Aug 2012 Last revised: 31 Oct 2023

See all articles by Georges Dionne

Georges Dionne

HEC Montreal - Department of Finance

Date Written: September 14, 2012

Abstract

We discuss the difficult question of measuring the effects of asymmetric information problems on resource allocation. Three problems are examined: moral hazard, adverse selection, and asymmetric learning. One theoretical conclusion, drawn by many authors, is that information problems may introduce significant distortions into the economy. However, we verify, in different markets, that efficient mechanisms have been introduced in order to reduce these distortions and even eliminate, at the margin, some residual information problems. This conclusion is stronger for pure adverse selection. One explanation is that adverse selection is related to exogenous characteristics, while asymmetric learning and moral hazard are due to endogenous actions that may change at any point in time. Dynamic data help to identify the three information problems by permitting causality tests.

Keywords: Empirical measure, information problem, moral hazard, adverse selection, learning, insurance fraud, causality tests, dynamic data

JEL Classification: C12, C18, C23, C26, D80, G22, C25, G11

Suggested Citation

Dionne, Georges, The Empirical Measure of Information Problems with Emphasis on Insurance Fraud and Dynamic Data (September 14, 2012). Handbook of Insurance, Second Edition, 423-448, 2014, Available at SSRN: https://ssrn.com/abstract=2134262 or http://dx.doi.org/10.2139/ssrn.2134262

Georges Dionne (Contact Author)

HEC Montreal - Department of Finance ( email )

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