"Something in the Air: Projection Bias and the Demand for Health Insurance" (with Tom Chang and Wei Huang)
Presenter: Yongxiang Wang, Associate Professor of Finance, Marshall School of Business, University of Southern California
Abstract: Using data on insurance contracts from one of China’s largest insurance companies, we find that daily air pollution levels have a significant effect on the decision to purchase or cancel health insurance in a manner inconsistent with rational choice theory. A one standard deviation increase in daily air pollution leads to a 7.2% increase in the number of insurance contracts sold that day. Conditional on purchase, a one standard deviation decrease in air pollution during the cooling-off (i.e., cost-free cancelation) period relative to the order-date level increases the return probability by 4.0%. We explore a range of potential mechanism and find strong evidence for projection bias as the key driver of these results.
CRW provides a forum for the presentation of original research by China scholars from around the country in social science and humanities, co-sponsored by Fudan-UC Center on Contemporary China and 21st Century China Program at the UC San Diego School of Global Policy & Strategy. To view archive and upcoming workshops list, visit: http://fudan-uc.ucsd.edu/workshop/index.html