Search results

Now showing 1 - 10 of 422
  • Publication
    Could Flood Insurance be Privatised in the United States? A Primer
    (2015-04-01) Michel-Kerjan, Erwann; Czajkowski, Jeffrey; Kunreuther, Howard
    Since 1968, homeowners’ flood insurance in the United States has been mainly provided through the federally-run National Flood Insurance Program (NFIP). The Flood Insurance Reform Act of 2012 raises the possibility of moving coverage to the private sector, assuming the market can price this risk effectively and that premiums reflect risk. This paper provides the first large-scale quantification of risk-based premiums for over 300,000 residences prone to either storm surge or inland flooding using commercially developed probabilistic catastrophe models, and compares these premiums with those currently charged by the NFIP. Our findings reveal significant differences between the two. In some areas, the NFIP charges prices that are more than 15 times the pure premium, while other areas are charged up to three times less than the pure premium. The paper discusses the market and policy implications of these findings.
  • Publication
    Demand for fixed-price multi-year contracts: Experimental evidence from insurance decisions
    (2015-10-01) Kunreuther, Howard; Michel-Kerjan, Erwann
    Do individuals prefer a fixed-price multi-year insurance (MYI) policy to current annual contracts with fluctuating prices? If so, are they willing to pay more for these policies? In a web-based 2-period repeated game with significant real money at stake, individuals have an opportunity to purchase 1-period insurance contracts, 2-period contracts or no insurance against the risk of a hurricane causing damage to their property. When premiums for both insurance options are actuarially fair, more than five times as many people favor the 2-period contract over the 1-period contract. The demand for a 2-period contract remains high even with a loading cost of 5% and 10% while keeping the 1-period premium actuarially fair, indicating a preference for stable premiums over time. These findings support the need for multi-year contracts that will lead more individuals to be adequately protected against future extreme events, given the empirical evidence on lack of interest in insurance against catastrophic risks.
  • Publication
    A Framework for Computational Strategic Analysis: Applications to Iterated Interdependent Security Games
    (2015-03-01) Vorobeychik, Yevgeniy; Kimbrough, Steven. O; Kunreuther, Howard
    Past work on tournaments in iterated prisoner’s dilemma and the evolution of cooperation spawned by Axelrod has contributed insights about achieving cooperation in social dilemmas, as well as a framework for strategic analysis in such settings. We present a broader, more extensive framework for strategic analysis in general games, which we illustrate in the context of a particular social dilemma encountered in interdependent security settings. Our framework is fully quantitative and computational, allowing one to measure the quality of strategic alternatives across a series of measures, and as a function of relevant game parameters. Our special focus on performing analysis over a parametric landscape is motivated by public policy considerations, where possible interventions are modeled as affecting particular parameters of the game. Our findings qualify the touted efficacy of the Tit-for-Tat strategy, demonstrate the importance of monitoring, and exhibit a phase transition in cooperative behavior in response to a manipulation of policy-relevant parameters of the game.
  • Publication
    Crime and property values: Evidence from the 1990s crime drop
    (2012-01-01) Pope, Devin G; Pope, Jaren C
    Does a dramatic drop in crime lead to an increase in property values? To date, the literature on how crime influences property values has focused solely within a single metropolitan area and has been limited primarily to cross-sectional analysis. In this study we exploit the dramatic, nationwide decrease in crime that occurred in the 1990s to examine the relationship between changes in crime rates and property values. To do this, we compile information on changes in property values and crime during the 1990s in nearly 3000 urban zip codes throughout the U.S. Using a fixed-effects framework as well as an instrumental variables strategy, our analysis implies a large and statistically significant association between crime and property values. The estimated elasticities of property values with respect to crime range from − 0.15 to − 0.35. Furthermore, zip codes in the top decile in terms of crime reduction saw property value increases of 7–19% during the 1990s. Both the empirical analysis and a graphical analysis are suggestive that decreasing crime leads to increasing property values. Highlights ► We exploit the sharp decrease in crime in the 1990s to examine the relationship between crime and property values. ► Information on changes in property values and crime in nearly 3000 U.S. zip codes are used to conduct the analysis. ► Our analysis implies a large and statistically significant association between crime and property values. ► The top decile of zip codes (in terms of crime reduction) saw property value increases between 7 and 19% during the 1990s.
  • Publication
    The Role of Network Embeddedness in Film Success
    (2016-06-01) Packard, Grant; Aribarg, Anocha; Eliashberg, Jehoshua; Foutz, Natasha Z
    In the early stage of film development when producers assemble a development team, it is important to understand the means by which different team members may contribute to the film's box office. Building upon theories from marketing and sociology, we propose that these contributions arise from team members' positions, or embeddedness, in a social network weaved through past film collaborations. These collaborations provide team members with opportunities to draw knowledge and skills from the network for new film projects. Our conceptual framework accentuates two aspects of network embeddedness: positional embeddedness (PE)—how well a person is tied to well-connected others, and junctional embeddedness (JE)—the extent to which a person bridges sub-communities in the industry. We examine how the importance of PE and JE varies by functional role (cast versus crew), and is moderated by the film's studio affiliation. Analyzing more than 15,000 industry professionals over nearly two decades of film collaborations, this research reveals crucial and divergent relationships: while high PE is more valuable for the cast, high JE is critical for the crew. This role distinction also depends on a film's studio affiliation. Managerially, these findings provide guidance to film executives and producers in revenue maximization through strategic team assembly, and to talents in career management.
  • Publication
    Do Online Reviews Reflect a Product’s True Perceived Quality? An Investigation of Online Movie Reviews Across Cultures
    (2010-09-01) Koh, Noi Sian; Hu, Nan; Clemons, Eric K
    This paper investigates when the reported average of online ratings matches the perceived average assessment of the population as a whole, including the average assessments of both raters and non-raters. We apply behavioral theory to capture intentions in rating online movie reviews in two dissimilar countries – China and the United States. We argue that consumers’ rating behaviors are affected by cultural influences and that they are influenced in predictable ways. Based on data collected from and, we found significant differences across raters from these two different cultures. Additionally, we examined how cultural elements influence rating behavior for a hybrid culture – Singapore. To study whether online consumer reviews are subjected to under-reporting bias, which is, consumers with extreme opinions are more likely to report their opinions than consumers with moderate reviews causing online reviews to be a biased estimator of a product’s true quality, we compare the consumer reviews posted online with those from an experimental study. Our results shows that under-reporting is more prevalent among US online network, thus online reviews are a better movie perceived quality proxy in China and Singapore than in the US.
  • Publication
    Mad and Misleading: Incidental Anger Promotes Deception
    (2016-11-01) Yip, Jeremy A; Schweitzer, Maurice E
    Emotions influence ethical behavior. Across four studies, we demonstrate that incidental anger, anger triggered by an unrelated situation, promotes the use of deception. In Study 1, participants who felt incidental anger were more likely to deceive their counterpart than those who felt neutral emotion. In Study 2, we demonstrate that empathy mediates the relationship between anger and deception. In Study 3, we contrast anger with another negative-valence emotion, sadness. We find that participants who felt incidental anger were more likely to use deception than were participants who felt incidental sadness or neutral emotion. In Study 4, we show that incentives moderate the relationship between anger and deception. Collectively, our work reveals that incidental anger promotes unethical behavior because angry people become less empathetic when pursuing their self-interest.
  • Publication
    Trash-Talking: Competitive Incivility Motivates Rivalry, Performance, and Unethical Behavior
    (2017-07-24) Yip, Jeremy A; Schweitzer, Maurice E; Nurmohamed, Samir
    Trash-talking increases the psychological stakes of competition and motivates targets to outperform their opponents. In Studies 1 and 2, participants in a competition who were targets of trash-talking outperformed participants who faced the same economic incentives, but were not targets of trash-talking. Perceptions of rivalry mediate the relationship between trash-talking and effort-based performance. In Study 3, we find that targets of trash-talking were particularly motivated to punish their opponents and see them lose. In Study 4, we identify a boundary condition, and show that trash-talking increases effort in competitive interactions, but incivility decreases effort in cooperative interactions. In Study 5, we find that targets of trash-talking were more likely to cheat in a competition than were participants who received neutral messages. In Study 6, we demonstrate that trash-talking harms performance when the performance task involves creativity. Taken together, our findings reveal that trash-talking is a common workplace behavior that can foster rivalry and motivate both constructive and destructive behavior.
  • Publication
    Trust Promotes Unethical Behavior: Excessive Trust, Opportunistic Exploitation, and Strategic Exploitation
    (2015-12-01) Yip, Jeremy A; Schweitzer, Maurice E
    Trust is critical for our cooperation and effective working relationships, but trust also enables exploitation and unethical behavior. Prior trust research has disproportionately focused on the benefits of trust, even though some of the most egregious unethical behaviors occur because of misplaced trust. Targets of exploitation misplace their trust, because they rely on the wrong cues and are exploited by people who either opportunistically or strategically take advantage of their trust. We call for future work to explore the critical link between trust and unethical behavior.
  • Publication
    Optimal Online Selection of a Monotone Subsequence: A Central Limit Theorem
    (2015-09-01) Arlotto, Alessandro; Nguyen, Vinh V; Steele, J. Michael
    Consider a sequence of n independent random variables with a common continuous distribution F, and consider the task of choosing an increasing subsequence where the observations are revealed sequentially and where an observation must be accepted or rejected when it is first revealed. There is a unique selection policy πn* that is optimal in the sense that it maximizes the expected value of Ln(πn*), the number of selected observations. We investigate the distribution of Ln(πn*); in particular, we obtain a central limit theorem for Ln(πn*) and a detailed understanding of its mean and variance for large n. Our results and methods are complementary to the work of Bruss and Delbaen (2004) where an analogous central limit theorem is found for monotone increasing selections from a finite sequence with cardinality N where N is a Poisson random variable that is independent of the sequence.