Advanced Search
MyIDEAS: Login to save this article or follow this journal

Repeated insurance relationships in a costly state verification model: With an application to deposit insurance

Contents:

Author Info

  • Smith, Bruce D.
  • Wang, Cheng

Abstract

We consider the problem of an insurer who enters into a repeated relationship with a set of risk averse agents in the presence of ex post verification costs. The insurer wishes to minimize the expected cost of providing these agents a certain expected utility level. We characterize the optimal contract between the insurer and the insured agents. We then apply the analysis to the provision of deposit insurance. Our results suggest - in a deposit insurance context - that it may be optimal to utilize the discount window early on, and to make deposit insurance payments only later, or not at all.

(This abstract was borrowed from another version of this item.)

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/B6VBW-3VNHDN6-J/2/4eddd10974e0a3e3dea4d0e4e3ba8695
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 42 (1998)
Issue (Month): 2 (July)
Pages: 207-240

as in new window
Handle: RePEc:eee:moneco:v:42:y:1998:i:2:p:207-240

Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/505566

Related research

Keywords:

Other versions of this item:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Townsend, Robert M, 1982. "Optimal Multiperiod Contracts and the Gain from Enduring Relationships under Private Information," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 90(6), pages 1166-86, December.
  2. Townsend, Robert M., 1983. "Theories of intermediated structures," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 18(1), pages 221-272, January.
  3. Boyd, John H. & Smith, Bruce D., 1997. "Capital Market Imperfections, International Credit Markets, and Nonconvergence," Journal of Economic Theory, Elsevier, vol. 73(2), pages 335-364, April.
  4. Townsend, Robert M, 1978. "Intermediation with Costly Bilateral Exchange," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 45(3), pages 417-25, October.
  5. Townsend, Robert M., 1988. "Information constrained insurance : The revelation principle extended," Journal of Monetary Economics, Elsevier, Elsevier, vol. 21(2-3), pages 411-450.
  6. Andrew Atkeson & Robert E Lucas, 2010. "On Efficient Distribution with Private Information," Levine's Working Paper Archive 2179, David K. Levine.
  7. Phelan, Christopher & Townsend, Robert M, 1991. "Computing Multi-period, Information-Constrained Optima," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 58(5), pages 853-81, October.
  8. Spear, Stephen E & Srivastava, Sanjay, 1987. "On Repeated Moral Hazard with Discounting," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 54(4), pages 599-617, October.
  9. Bernanke, Ben & Gertler, Mark, 1989. "Agency Costs, Net Worth, and Business Fluctuations," American Economic Review, American Economic Association, vol. 79(1), pages 14-31, March.
  10. Williamson, Stephen D, 1987. "Financial Intermediation, Business Failures, and Real Business Cycles," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 95(6), pages 1196-1216, December.
  11. Boyd, John H & Smith, Bruce D, 1994. "How Good Are Standard Debt Contracts? Stochastic versus Nonstochastic Monitoring in a Costly State Verification Environment," The Journal of Business, University of Chicago Press, vol. 67(4), pages 539-61, October.
  12. Stephen D. Williamson, 1995. "Discount Window Lending and Deposit Insurance," Macroeconomics, EconWPA 9504001, EconWPA, revised 18 Apr 1995.
  13. Townsend, Robert M., 1979. "Optimal contracts and competitive markets with costly state verification," Journal of Economic Theory, Elsevier, vol. 21(2), pages 265-293, October.
  14. Phelan, Christopher, 1994. "Incentives and Aggregate Shocks," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 61(4), pages 681-700, October.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Boyd, John H. & Smith, Bruce D., 1999. "The Use of Debt and Equity in Optimal Financial Contracts," Journal of Financial Intermediation, Elsevier, vol. 8(4), pages 270-316, October.
  2. Narayana R. Kocherlakota, 2000. "Risky collateral and deposit insurance," Staff Report, Federal Reserve Bank of Minneapolis 274, Federal Reserve Bank of Minneapolis.
  3. Monnet, Cyril & Quintin, Erwan, 2002. "Optimal contracts in a dynamic costly state verification model," Working Paper Series 0126, European Central Bank.
  4. Edward Simpson Prescott, 2004. "Auditing And Bank Capital Regulation," Working Papers, CEMFI wp2004_0412, CEMFI.
  5. Espinosa-Vega, Marco A. & Smith, Bruce D. & Yip, Chong K., 2002. "Monetary Policy and Government Credit Programs," Journal of Financial Intermediation, Elsevier, vol. 11(3), pages 232-268, July.
  6. Yi Jin & Charles K.Y. Leung & Zhixiong Zeng, 2012. "Real Estate, the External Finance Premium and Business Investment: A Quantitative Dynamic General Equilibrium Analysis," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 40(1), pages 167-195, 03.

Lists

This item is featured on the following reading lists or Wikipedia pages:
  1. Canadian Macro Study Group

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:moneco:v:42:y:1998:i:2:p:207-240. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.