Risk Aversion

This paper asks how private misperceptions about individual risk affect equilibrium insurance contracts, pooling, and welfare when contracts adjust endogenously. The author pairs a general equilibrium model and estimation algorithm with evidence from survey and market data to trace how the joint distribution of actual risk and misperception matters for contract outcomes. The contribution is a modeling and estimation approach intended to recover equilibrium contracts, pooling behavior, and welfare effects in settings where agents misperceive their own risk.

Does early-life trauma influence battlefield behavior? Evidence from Irish regiments in the American Civil War shows that experiencing the Irish Potato Famine more than a decade earlier made soldiers more likely to desert.