AbstractProvider insurance is insurance offered by the provider of a product or service against losses or damages incurred in connection with the use of that product or service. It is demonstrated that a rate-setting agency, with no information about consumers, can design a provider-insurance mechanism that induces both the provider and the consumer to reduce losses efficiently, and, at the same time, transfers risk from the (risk-averse) consumer to the (risk-neutral) provider without moral hazard. The structure of the optimal provider-insurance mechanism is derived. The optimal mechanism must be imposed on a noncompetitive industry by regulators, but it can arise spontaneously in competitive industries and can be sustained.
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Bibliographic InfoArticle provided by The RAND Corporation in its journal Bell Journal of Economics.
Volume (Year): 14 (1983)
Issue (Month): 2 (Autumn)
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Web page: http://www.rje.org
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- Claudia Mejía Pérez, 1999. "La pobreza en Colombia 1978 y 1995 : indicadores," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 51, pages 195-222, Julio Dic.
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