Self-protection and insurance with interdependencies
AbstractWe study optimal investment in self-protection of insured individuals when they face interdependencies in the form of potential contamination from others. If individuals cannot coordinate their actions, then the positive externality of investing in self-protection implies that, in equilibrium, individuals underinvest in self-protection. Limiting insurance coverage through deductibles or selling at-fault insurance can partially internalize this externality and thereby improve individual and social welfare. --
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Bibliographic InfoPaper provided by Center for Financial Studies (CFS) in its series CFS Working Paper Series with number 2007/22.
Date of creation: 2007
Date of revision:
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Externality; Mitigation; Insurance;
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D62 - Microeconomics - - Welfare Economics - - - Externalities
- D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
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- Ian Ayres & Steven D. Levitt, 1997.
"Measuring Positive Externalities from Unobservable Victim Precaution: An Empirical Analysis of Lojack,"
NBER Working Papers
5928, National Bureau of Economic Research, Inc.
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- Thomas VON UNGERN-STERNBERG, 1995.
"The Limits of Competition : Housing Insurance in Switzerland,"
Cahiers de Recherches Economiques du DÃ©partement d'EconomÃ©trie et d'Economie politique (DEEP)
9511, Université de Lausanne, Faculté des HEC, DEEP.
- von Ungern-Sternberg, Thomas, 1996. "The limits of competition: Housing insurance in Switzerland," European Economic Review, Elsevier, vol. 40(3-5), pages 1111-1121, April.
- Alexander Muermann & Howard Kunreuther, 2008. "Self-protection and insurance with interdependencies," Journal of Risk and Uncertainty, Springer, vol. 36(2), pages 103-123, April.
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