We use a controlled laboratory experiment to study firm’s protection against potential technological damages. The probability of a catastrophic event is known, and the firm’s costly investment in safety reduces it. The firm can also buy an insurance with full or partial refund against the consequences of the catastrophic event, which ultimately reduces the variance of the firm’s investment-in-safety lottery. The firm makes these two choices simultaneously, after observing the insurance contract proposed by an insurer who chooses this contract within (...) a set of premium–deductible combinations. We parametrize the insurer–firm game such that a risk-neutral insurer maximizes his expected profit by offering an actuarially fair contract with full insurance; a risk-neutral firm is indifferent between investing in safety and accepting a fair insurance contract. We aim at understanding whether investment in safety and insurance are substitutes or complements in the firm’s risk management of catastrophic events. In line with our predictions, the experimental results suggest that they are substitutes rather than complements: the firm’s investment in safety measures is affected by the insurer’s proposed contract, the latter usually involving only partial insurance. (shrink)

Investigating the bases of inter-individual differences in risk-taking is necessary to refine our cognitive and neural models of decision-making and to ultimately counter risky behaviours in real-life policy settings. However, recent evidence suggests that behavioural tasks fare poorly compared to standard questionnaires to measure individual differences in risk-taking. Crucially, using model-based measures of risk taking does not seem to improve reliability. Here we put forward two possible - not mutually exclusive - explanations for these results and suggest future avenues of (...) research to improve the assessment of inter-individual differences in risk-taking by combining repeated online testing and mechanistic computational models. (shrink)