IDEAS home Printed from https://ideas.repec.org/p/cwl/cwldpp/691.html
   My bibliography  Save this paper

Insurance, Flexibility and Non-contingent Trades

Author

Listed:
  • Russell Cooper

Abstract

This paper considers non-contingent trades through either forward markets or simple contracts. The point of the inquiry is to understand the costs and benefits of trades of this nature. We focus on the tradeoff between insurance (a benefit) and the loss of flexibility in decisions (a cost) as determining properties of trading in forward markets. This tradeoff is also used to explore contract length.

Suggested Citation

  • Russell Cooper, 1984. "Insurance, Flexibility and Non-contingent Trades," Cowles Foundation Discussion Papers 691, Cowles Foundation for Research in Economics, Yale University.
    • Handle: RePEc:cwl:cwldpp:691
    as

    Download full text from publisher

    File URL: https://cowles.yale.edu/sites/default/files/files/pub/d06/d0691.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Arrow, Kenneth J, 1974. "Limited Knowledge and Economic Analysis," American Economic Review, American Economic Association, vol. 64(1), pages 1-10, March.
    2. Cooper, Russell & Hayes, Beth, 1987. "Multi-period insurance contracts," International Journal of Industrial Organization, Elsevier, vol. 5(2), pages 211-231.
    3. Goldman, Steven Marc, 1974. "Flexibility and the demand for money," Journal of Economic Theory, Elsevier, vol. 9(2), pages 203-222, October.
    4. Harris Milton & Townsend, Robert M, 1981. "Resource Allocation under Asymmetric Information," Econometrica, Econometric Society, vol. 49(1), pages 33-64, January.
    5. Hart, Oliver D., 1975. "On the optimality of equilibrium when the market structure is incomplete," Journal of Economic Theory, Elsevier, vol. 11(3), pages 418-443, December.
    6. Gray, Jo Anna, 1978. "On Indexation and Contract Length," Journal of Political Economy, University of Chicago Press, vol. 86(1), pages 1-18, February.
    7. Batra, Raveendra N & Russell, William R, 1974. "Gains from Trade Under Uncertainty," American Economic Review, American Economic Association, vol. 64(6), pages 1040-1048, December.
    8. Ross, Stephen A, 1981. "Some Stronger Measures of Risk Aversion in the Small and the Large with Applications," Econometrica, Econometric Society, vol. 49(3), pages 621-638, May.
    9. Stephen J. Turnovsky, 1974. "Technological and Price Uncertainty in a Ricardian Model of International Trade," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 41(2), pages 201-217.
    10. Townsend, Robert M, 1982. "Optimal Multiperiod Contracts and the Gain from Enduring Relationships under Private Information," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1166-1186, December.
    11. Yohe, Gary Wynn, 1977. "Comparisons of price and quantity controls: A survey," Journal of Comparative Economics, Elsevier, vol. 1(3), pages 213-233, September.
    12. Radner, Roy, 1981. "Monitoring Cooperative Agreements in a Repeated Principal-Agent Relationship," Econometrica, Econometric Society, vol. 49(5), pages 1127-1148, September.
    13. Grossman, Sanford J., 1977. "A characterization of the optimality of equilibrium in incomplete markets," Journal of Economic Theory, Elsevier, vol. 15(1), pages 1-15, June.
    14. Elie Appelbaum & Chin Lim, 1981. "Ex Ante and Ex Post Firms and Equilibrium Price Fluctuations," University of Western Ontario, Departmental Research Report Series 8118, University of Western Ontario, Department of Economics.
    15. Martin L. Weitzman, 1974. "Prices vs. Quantities," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 41(4), pages 477-491.
    16. Townsend, Robert M, 1978. "On the Optimality of Forward Markets," American Economic Review, American Economic Association, vol. 68(1), pages 54-66, March.
    17. Costas Azariadis & Russell Cooper, 1985. "Predetermined Prices and the Allocation of Social Risks," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(2), pages 495-518.
    18. Baron, David P, 1970. "Price Uncertainty, Utility, and Industry Equilibrium in Pure Competition," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 11(3), pages 463-480, October.
    19. Frederick V. Waugh, 1944. "Does the Consumer Benefit from Price Instability?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 58(4), pages 602-614.
    20. Dionne, G., 1981. "Adverse Selection and Repeated Insurance Contracts," Cahiers de recherche 8139, Universite de Montreal, Departement de sciences economiques.
    21. Sandmo, Agnar, 1971. "On the Theory of the Competitive Firm under Price Uncertainty," American Economic Review, American Economic Association, vol. 61(1), pages 65-73, March.
    22. Joseph E. Stiglitz, 1982. "The Inefficiency of the Stock Market Equilibrium," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 49(2), pages 241-261.
    23. George Stigler, 1939. "Production and Distribution in the Short Run," Journal of Political Economy, University of Chicago Press, vol. 47, pages 305-305.
    24. Eaton, Jonathan, 1979. "The Allocation of Resources in an Open Economy with Uncertain Terms of Trade," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 20(2), pages 391-403, June.
    25. Jonathan Eaton, 1980. "Price Variability, Utility and Savings," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 47(3), pages 513-520.
    26. Kreps, David M, 1979. "A Representation Theorem for "Preference for Flexibility"," Econometrica, Econometric Society, vol. 47(3), pages 565-577, May.
    27. Dreze, Jacques H. & Modigliani, Franco, 1972. "Consumption decisions under uncertainty," Journal of Economic Theory, Elsevier, vol. 5(3), pages 308-335, December.
    28. Stanley J. Liebowitz & Stephen E. Margolis, 1981. "A Comment on Ordover and Willig's "On the Optimal Provision of Journals qua Sometimes Shared Goods"," University of Western Ontario, Departmental Research Report Series 8109, University of Western Ontario, Department of Economics.
    29. K. J. Arrow, 1964. "The Role of Securities in the Optimal Allocation of Risk-bearing," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 31(2), pages 91-96.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dionne, Georges & Harrington, Scott, 2017. "Insurance and Insurance Markets," Working Papers 17-2, HEC Montreal, Canada Research Chair in Risk Management.
    2. Dionne, G. & Doherty, N., 1991. "Adverse Selection in Insurance Markets: a Selective Survey," Cahiers de recherche 9105, Universite de Montreal, Departement de sciences economiques.
    3. Georges Dionne & Nathalie Fombaron & Neil Doherty, 2012. "Adverse Selection in Insurance Contracting," Cahiers de recherche 1231, CIRPEE.
    4. Helpman, Elhanan & Razin, Assaf, 1979. "A Theory of International Trade Under Uncertainty," Elsevier Monographs, Elsevier, edition 1, number 9780123396501 edited by Shell, Karl.
    5. Baldursson, Fridrik M & von der Fehr, N.-H.M.Nils-Henrik M, 2004. "Price volatility and risk exposure: on market-based environmental policy instruments," Journal of Environmental Economics and Management, Elsevier, vol. 48(1), pages 682-704, July.
    6. Fridrik Baldursson & Nils-Henrik Fehr, 2012. "Price Volatility and Risk Exposure: On the Interaction of Quota and Product Markets," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 52(2), pages 213-233, June.
    7. Henri Loubergé, 1998. "Risk and Insurance Economics 25 Years After," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 23(4), pages 540-567, October.
    8. Thomas Eichner & Rüdiger Pethig, 2015. "Efficient Management of Insecure Fossil Fuel Imports through Taxing Domestic Green Energy?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(5), pages 724-751, October.
    9. Tirelli, Mario, 2008. "Constrained inefficiency in GEI: A geometric argument," Journal of Mathematical Economics, Elsevier, vol. 44(11), pages 1197-1214, December.
    10. Christophe Gouel, 2014. "Food Price Volatility and Domestic Stabilization Policies in Developing Countries," NBER Chapters, in: The Economics of Food Price Volatility, pages 261-306, National Bureau of Economic Research, Inc.
    11. Aranoff, Gerald, 2011. "Competitive manufacturing with fluctuating demand and diverse technology: Mathematical proofs and illuminations on industry output-flexibility," Economic Modelling, Elsevier, vol. 28(3), pages 1441-1450, May.
    12. Jean-Marc Tallon, 1995. "Théorie de l'équilibre général avec marchés financiers incomplets," Revue Économique, Programme National Persée, vol. 46(5), pages 1207-1239.
    13. Sabarwal Tarun, 2007. "Value Maximization as an Ex-Post Consistent Firm Objective When Markets are Incomplete," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 7(1), pages 1-21, January.
    14. Geanakoplos, J. & Polemarchakis, H., 1985. "Existence,regularity, and constrained suboptimality of competitive allocations when the asset market is incomplete," LIDAM Discussion Papers CORE 1985037, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    15. von Amsberg, Joachim, 1995. "Excessive environmental risks: An intergenerational market failure," European Economic Review, Elsevier, vol. 39(8), pages 1447-1464, October.
    16. Achim I. Czerny & Erik T. Verhoef & Anming Zhang, 2015. "A Theory of Continuous Uncertainty Types," Tinbergen Institute Discussion Papers 15-065/VIII, Tinbergen Institute.
    17. Zame, William R, 1993. "Efficiency and the Role of Default When Security Markets Are Incomplete," American Economic Review, American Economic Association, vol. 83(5), pages 1142-1164, December.
    18. Marco de Pinto & Laszlo Goerke, 2022. "Cost uncertainty in an oligopoly with endogenous entry," Bulletin of Economic Research, Wiley Blackwell, vol. 74(4), pages 927-948, October.
    19. Hayne E. Leland, 1974. "Production Theory and the Stock Market," Bell Journal of Economics, The RAND Corporation, vol. 5(1), pages 125-144, Spring.
    20. Mr. Anton Korinek, 2011. "The New Economics of Capital Controls Imposed for Prudential Reasons+L4888," IMF Working Papers 2011/298, International Monetary Fund.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cwl:cwldpp:691. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Brittany Ladd (email available below). General contact details of provider: https://edirc.repec.org/data/cowleus.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.