Our speaker will be Justin Sydnor (Wisconsin School of Business).

He will give a talk on "Liquidity Constraints and the Value of Insurance" (joint with Keith Marzilli Ericson).

Abstract: Insurance moves resources across both time and states. We study the consumption-smoothing benefits of insurance under liquidity constraints in a model where contracts span multiple consumption periods. The normative benchmarks for insurance demand under liquidity constraints differ qualitatively and quantitatively from the standard model: individuals may only partially insure at actuarially fair prices, may benefit from insurance when premiums are very high and even sometimes when dominated, and may value insurance against events that will surely happen. Simulations for health insurance show that the alternative normative benchmark for liquidity-constrained individuals affects whether common choice patterns should be interpreted as mistakes.

The talk will take place on June 05, 2024 at 02:00 pm in room TC.4.05.