The Finance Brown Bag Seminar is held by the Institute for Finance, Banking and Insurance (WU Vienna) and the Vienna Graduate School of Finance (VGSF). It serves as a presentation platform for PhD students, faculty members, and visitors. An overview of BBS on the website of the Institute for Finance, Banking and Insurance.
Septmber 25th, 2019, 12:00-13:30, D4.0.019
Lu Li, LMU München
Title: "Opening up the Black Box: the Impact of Technological Transparency on Self-Protection"
This article discusses the behavioral and welfare implications of uncovering the mechanism of self-protection technologies. Based on a new interpretation of self-protection, we introduce the concept of technological transparency -- the extent to which the mechanism of the technology is understood. We analyze the consequence of improved technological transparency according to whether the improvement stems from uncovering exogenous or endogenous risk determinants. We show that technological transparency improves welfare through enabling more efficient prevention, but this welfare improvement may be undermined or even reversed if information is incompletely disclosed or if the risk can be insured through private insurance markets. We also show that technological transparency affects behavior through an ex ante information channel and an ex post regret channel. Our findings have implications on the cost-benefit analysis of scientific research conducted to identify hidden risk determinants. They also inform the design of personalized preventive healthcare, as well as information campaigns to promote public safety.