The privacy problem for internalizing behavioral externalities

Jeffers, Matthew (2021) The privacy problem for internalizing behavioral externalities. Society and Economy, 43 (1). pp. 60-74. DOI

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Providers of insurance used to have no other choice than to absorb the behavioral externalities of their policy-holders. New technology coupled with the incentives of low-risk consumers has made it possible for firms to price-discriminate on the basis of behavioral risk and thus internalize behavioral externalities. While cost-internalization is generally a positive development, the introduction of behavioral tracking technologies also introduces new economic and social costs. This paper explores the economic and moral trade-offs of adopting behavioral tracking technologies in various insurance settings.

Item Type:Article
Uncontrolled Keywords:privacy, behavioral externalities, pooling equilibria, separating equilibria, asymmetric information, price discrimination
JEL classification:D62 - Externalities
D82 - Information, Knowledge, and Uncertainty: Asymmetric and Private Information - Mechanism Design
ID Code:6416
Deposited By: Veronika Vitéz
Deposited On:13 Apr 2021 11:08
Last Modified:13 Apr 2021 11:08

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