Event Detail

Inattention, Information Frictions, and Crop Insurance Choices

Presented by:
Sheldon Du
Department of Agricultural and Applied Economics
University of Wisconsin-Madison

Wednesday, November 26, 2025
12:00 pm-1:15 pm
Taylor-Hibbard Seminar Room (Rm103)

This paper develops a structural two-stage model of crop insurance demand that separately identifies inattention, inertia, and costly information acquisition. In stage one, farmers decide whether to reconsider their current plan; in stage two, attentive farmers evaluate alternatives and incur information costs on plan attributes. Using detailed administrative data, we find substantial frictions at both margins. Counterfactuals suggest eliminating inattention increases welfare by 9.6%, and removing both inattention and information frictions raises welfare by 11.1%, with gains concentrated in the central Corn Belt. Results highlight the need to address behavioral and informational frictions in complex choice environment.