Insurance bargaining under ambiguity
AbstractThis paper investigates the effects of an increase in ambiguity aversion and an increase in ambiguity in an insurance bargaining game with a risk-and-ambiguity-neutral insurer and a risk-and-ambiguity-averse client. Both a cooperative and a non-cooperative bargaining game are examined. We show that, in both games, full coverage is optimal in the presence of ambiguity, and that the optimal premium is higher in the presence of ambiguity than in the absence of it. Furthermore, the optimal premium will increase with both the degree of ambiguity aversion and an increase in ambiguity.
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Bibliographic InfoArticle provided by Elsevier in its journal Insurance: Mathematics and Economics.
Volume (Year): 53 (2013)
Issue (Month): 3 ()
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/505554
Insurance bargaining; Cooperative bargaining; Non-cooperative bargaining; Ambiguity; Ambiguity aversion;
Find related papers by JEL classification:
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
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