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Market equilibrium of the agricultural product target price insurance and its moral hazard premium

Author

Listed:
  • Liang ZHAO

    (Agricultural Information Institute, Chinese Academy of Agricultural Sciences and Key Laboratory of Agri-information Service Technology, Ministry of Agriculture, Beijing, China)

  • Yueying MU

    (College of Economics and Management, China Agricultural University, Beijing, China)

  • Bo SONG

    (College of Economics and Management, China Agricultural University, Beijing, China)

  • Qiao ZHANG

    (Agricultural Information Institute, Chinese Academy of Agricultural Sciences and Key Laboratory of Agri-information Service Technology, Ministry of Agriculture, Beijing, China)

Abstract

In the study, an expected revenue model was built for the farmers and insurance institutes in China, with the aim of researching the realization conditions of the target price insurance market equilibrium; analysing the reasons and consequences of the moral hazards; obtaining a paradox and elaborating the reason; measuring the moral hazard premium and researching positions, as well as the role of government in the target price premium; and also discussing the relationship between the target price and the cost price. The conclusions found were that the market risk was the major risk in agriculture; the target price insurance implementation relies on the government subsidy, which shall be equivalent to the sum of the farmers' moral hazard premium and social costs; the moral hazard premium has a negative externality; the insurance companies are also the beneficiaries of the farmers' moral hazard; and the best target price should be smaller than the total cost price of the agricultural products.

Suggested Citation

  • Liang ZHAO & Yueying MU & Bo SONG & Qiao ZHANG, 2016. "Market equilibrium of the agricultural product target price insurance and its moral hazard premium," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 62(5), pages 215-224.
    • Handle: RePEc:caa:jnlage:v:62:y:2016:i:5:id:120-2015-agricecon
    DOI: 10.17221/120/2015-AGRICECON
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    References listed on IDEAS

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