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Evaluating the Effects of Asymmetric Information in a Model of Crop Insurance

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  • Michael Hoy

    (University of Guelph; Department of Economics.)

  • Adeyemi Esuola
  • Zahirul Islam
  • Calum G. Turvey

Abstract

Asymmetric information in the form of moral hazard and adverse selection can result in sizeable efficiency losses and program costs for government provided crop insurance plans. We present a methodology and illustrative simulations to show how these two types of information problems interact in way to create program costs for the providers of crop insurance. Our methodology allows us to ascertain the relative contributions to program costs of these two types of phenomenona, which is critical for improving the design of such insurance plans at least possible cost as well as for studying general efficiency considerations.

Suggested Citation

  • Michael Hoy & Adeyemi Esuola & Zahirul Islam & Calum G. Turvey, 2007. "Evaluating the Effects of Asymmetric Information in a Model of Crop Insurance," Working Papers 0706, University of Guelph, Department of Economics and Finance.
    • Handle: RePEc:gue:guelph:2007-6
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    References listed on IDEAS

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    Cited by:

    1. Newton, John & Bozic, Marin & Wolf, Chris & Thraen, Cameron S., 2014. "Option Valuation and Speculative Interest in a MPP-Dairy Margin Futures Contract," 2014 AAEA: Crop Insurance and the 2014 Farm Bill Symposium: Implementing Change in U.S. Agricultural Policy, October 8-9, 2014, Louisville, KY 186633, Agricultural and Applied Economics Association.
    2. Sarah C. Sellars & Nathanael M. Thompson & Michael E. Wetzstein & Laura Bowling & Keith Cherkauer & Charlotte Lee & Jane Frankenberger & Ben Reinhart, 2022. "Does crop insurance inhibit climate change technology adoption?," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 27(3), pages 1-20, March.
    3. John Newton & Cameron S. Thraen & Marin Bozic, 2016. "Evaluating Policy Design Choices for the Margin Protection Program for Dairy Producers: An Expected Indemnity Approach," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 38(4), pages 712-730.
    4. Newton, John & Thraen, Cameron S. & Bozic, Marin, 2013. "Whither Dairy Policy? Evaluating Expected Government Outlays and Distributional Impacts of Alternative 2013 Farm Bill Dairy Title Proposals," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 153750, Agricultural and Applied Economics Association.

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    Keywords

    Crop insurance; adverse selection and moral hazard.;

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