Radoslav Baltezarevic, Borivoje Baltezarevic, Piotr Kwiatek and Vesna Baltezarevic ABSTRACT: The emergence of the Internet and various forms of virtual communities has led to the impact of a new social space on individuals who frequently replace the real world with alternative forms of socializing. In virtual communities, new ‘friendships’ are easily accepted; however, how this...

Catastrophe insurance differs from regular insurance in that individual claims are correlated and insurers have to pay more clients at once, which creates a liquidity strain. In this paper, I show two related findings: first, that when customers know their claims are correlated, this correlation can cause positive-sloping demand at low prices, and second, that because of this, a catastrophe insurance market can fail. Market failure is a stable equilibrium, which provides a better understanding of the frequent failures in catastrophe (...) insurance markets. (shrink)

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