Optimal Risk-Sharing and Deductables in Insurance
AbstractRisk-sharing in insurance is analyzed, with a view towards explaining the prevalence of deductibles. First we introduce, in a modern setting, the main concepts of the theory of risk-sharing in a group of agents. This theory we apply to the risk-sharing problem between an insurer and an insurance customer. We motivate the development through simple examples, illustrating some of the subtle points of this theory. In order to deduce deductibles endogenously, not explained in the neoclassical model, we separately introduce (i) the insurable asset as a decision variable, (ii) administrative costs, and (iii) moral hazard, and illustrate by examples.
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Bibliographic InfoPaper provided by Department of Business and Management Science, Norwegian School of Economics in its series Discussion Papers with number 2006/24.
Length: 13 pages
Date of creation: 29 Dec 2006
Date of revision:
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Postal: NHH, Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
Phone: +47 55 95 92 93
Fax: +47 55 95 96 50
Web page: http://www.nhh.no/en/research-faculty/department-of-business-and-management-science.aspx
More information through EDIRC
Reinsurance Exchange; Equilibrium; Pareto Optimality; Representative Agent; Core Solution; Individual Rationality; Deductibles; Costs; Moral Hazard;
Find related papers by JEL classification:
- D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-01-23 (All new papers)
- NEP-CFN-2007-01-23 (Corporate Finance)
- NEP-IAS-2007-01-23 (Insurance Economics)
- NEP-UPT-2007-01-23 (Utility Models & Prospect Theory)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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