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11 November 2019:

Monday  11 November 2019  12:00 - 13:30

Allocative Efficiency in Firm Production: A Nonparametric Test Using Procurement Lotteries

Dave Donaldson (MIT)

32L 1.04, 1st Floor Conference Room, LSE, 32 Lincoln's Inn Fields, London WC2A 3PH

CEP/STICERD Applications Seminars
Monday  11 November 2019  12:30 - 14:00

Buying Data from Consumers: The Impact of Monitoring in U.S. Auto Insurance

Yizhou Jin (Berkeley)

[pdf] Download Paper

We study the impact of a voluntary monitoring program by a major U.S. auto insurer, in which drivers accept short-term tracking in exchange for potential discounts on future premiums. We acquire a detailed proprietary dataset from the insurer and match it with competitor price menus. We first quantify the degree to which monitoring incentivizes safer driving and allows more accurate risk-based pricing. We then model the demand and supply forces that determine the amount of information revealed in equilibrium: structural demand estimates capture correlations among cost and demand for insurance and for monitoring; a dynamic pricing model links the firm's information on driver risk to prices. We find large profit and welfare gains from introducing monitoring. Safer drivers self-select into monitoring, with those who opt in becoming 30% safer when monitored. Given resource costs and price competition, a data-sharing mandate would have reduced short-term welfare

32L 2.04, 2nd Floor Conference Room, LSE, 32 Lincoln's Inn Fields, London WC2A 3PH

STICERD Industrial Organisation Seminars
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