Optimal risk-sharing under adverse selection and imperfect risk perception
AbstractThe present paper thoroughly explores second-best efficient allocations in an insurance economy with adverse selection. We start with a natural extension of the classical model, assuming less than perfect risk perception. We characterize the constraints on efficient redistribution, and we summarize the incidence of incentives on the economy with the notions of weak and strong adverse selection. Finally, we show in what sense improving risk perception enhances welfare.
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Bibliographic InfoArticle provided by Canadian Economics Association in its journal Canadian Journal of Economics.
Volume (Year): 38 (2005)
Issue (Month): 3 (August)
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Postal: Canadian Economics Association Prof. Steven Ambler, Secretary-Treasurer c/o Olivier Lebert, CEA/CJE/CPP Office C.P. 35006, 1221 Fleury Est Montréal, Québec, Canada H2C 3K4
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Other versions of this item:
- Chassagnon, Arnold & Villeneuve, Bertrand, 2005. "Optimal risk-sharing under adverse selection and imperfect risk perception," Open Access publications from UniversitÃ© Paris-Dauphine urn:hdl:123456789/5357, Université Paris-Dauphine.
- Chassagnon, Arnold & Villeneuve, Bertrand, 2005. "Optimal Risk-Sharing under Adverse Selection and Imperfect Risk Perception," Open Access publications from University of Toulouse 1 Capitole http://neeo.univ-tlse1.fr, University of Toulouse 1 Capitole.
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
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- Amy Finkelstein & Kathleen McGarry, 2006. "Multiple Dimensions of Private Information: Evidence from the Long-Term Care Insurance Market," American Economic Review, American Economic Association, vol. 96(4), pages 938-958, September.
- DE FEO, Giuseppe & HINDRIKS, Jean, 2005.
"Efficiency of competition in insurance markets with adverse selection,"
CORE Discussion Papers
2005054, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Giuseppe, DE FEO & Jean, HINDRIKS, 2005. "Efficiency of Competition in Insurance Markets with Adverse Selection," Discussion Papers (ECON - DÃ©partement des Sciences Economiques) 2005042, Université catholique de Louvain, Département des Sciences Economiques.
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