This paper extends the theoretical literature on underwriting cycles by assuming insurers have heterogeneous exposure to a catastrophe. Distinct from the existing literature on insurance cycles, we model optimal contracting by competitive insurers. Since losses take time to pay out, and insurers...

This paper looks for evidence of adverse selection in the relationship between primary insurers and reinsurers. We test the implications of a model in which informational asymmetry – and therefore, its negative consequences – decline over time. Our tests involve a data panel consisting of...

Do entrepreneurs have optimism in subsistence economies, and if so, how does it influence entrepreneurial outcomes? We investigate this question by taking the situated view of optimism. We reason that variations in optimism are a function of the type of opportunity pursued and the diversity of...

We examine two distinct perspectives to analyze the role of financial slack in the decisions of technology venture managers to seek strategic alliances. According to the capabilities perspective, financial slack provides managers with the ability to maximize the benefits from acquiring missing...

We explore the effects that optimism bias has on the demand for insurance. Our theory is based on a simple binomial model of the demand for insurance in which consumers make optimistically biased assessments concerning the likelihood of future outcomes. From this model, we derive an insurance...