The Design of Optimal Insurance Contracts: A Topological Approach
AbstractThis article deals with the optimal design of insurance contracts when the insurer faces administrative costs. If the literature provides many analyses of risk sharing with such costs, it is often assumed that these costs are linear. Furthermore, mathematical tools or initial conditions differ from one paper to another. We propose here a unified framework in which the problem is presented and solved as an infinite dimensional optimization program on a functional vector space equipped with an original norm. This general approach leads to the optimality of contracts lying on the frontier of the indemnity functions set. This frontier includes, in particular, contracts with a deductible, with total insurance and the null vector. Hence, we unify the existing results and point out some extensions. The Geneva Papers on Risk and Insurance Theory (1997) 22, 5–19. doi:10.1023/A:1008654729504
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Bibliographic InfoArticle provided by Palgrave Macmillan in its journal The Geneva Papers on Risk and Insurance Theory.
Volume (Year): 22 (1997)
Issue (Month): 1 (June)
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- Kaluszka, Marek, 2004. "An extension of Arrow's result on optimality of a stop loss contract," Insurance: Mathematics and Economics, Elsevier, vol. 35(3), pages 527-536, December.
- Johanna Etner & Sandrine Spaeter, 2010. "The impact of ambiguity on health prevention and insurance," Working Papers of BETA 2010-08, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
- Hung-Hsi Huang, 2006. "Optimal insurance contract under a value-at-risk constraint," The Geneva Papers on Risk and Insurance Theory, Springer, vol. 31(2), pages 91-110, December.
- Michael Breuer, 2006. "Optimal insurance contracts without the non-negativity constraint on indemnities: revisited," The Geneva Papers on Risk and Insurance Theory, Springer, vol. 31(1), pages 5-9, July.
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