What are the welfare effects of a policy that facilitates for insurance customers to privately and covertly learn about their accident risks? We endogenize the information structure in Stiglitz's classic monopoly insurance model. We first show that his results are robust: For a small information...

When an agent receives information from a source whose accuracy might be either high or low, standard theory dictates that she update as if the source has medium accuracy. In a lab experiment, subjects deviate from this benchmark by reacting less to uncertain sources, especially when the sources...