Adverse Selection in an Insurance Market with Government-Guaranteed Subsistence Levels
AbstractWe consider a competitive insurance market with adverse selection. Unlike the standard models, we assume that individuals receive the benefit of some type of potential government assistance that guarantees them a minimum level of wealth. For example, this assistance might be some type of government-sponsored relief program, or it might simply be some type of limited liability afforded via bankruptcy laws. Government assistance is calculated ex post of any insurance benefits. This alters the individuals’ demand for insurance coverage. In turn, this affects equilibria in various insurance models of markets with adverse selection.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1217.
Date of creation: 2004
Date of revision:
adverse selection; insurance; government relief;
Other versions of this item:
- Bum J. Kim & Harris Schlesinger, 2005. "Adverse Selection in an Insurance Market With Government-Guaranteed Subsistence Levels," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 72(1), pages 61-75.
- NEP-ALL-2004-07-04 (All new papers)
- NEP-IAS-2004-07-04 (Insurance Economics)
- NEP-MIC-2004-07-04 (Microeconomics)
- NEP-SEA-2004-07-04 (South East Asia)
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