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Insurance, Pooling, and Resistance to Reform: The Case of Individual Uncertainty

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Listed:
  • Tim Friehe

    (Eberhard Karls University Tübingen)

Abstract

This paper shows that individual risk-type uncertainty can prevent reforms of the insurance system that would benefit the majority of individuals. We consider the case where a subset of the population is uncertain of their risk type and contrast two insurance regimes the status quo of mandated pooling of all risk types and the reform proposal being insurance with risk-type separation over time, using Bayesian updating. Most individuals would benefit from the reform since their risk type is better than the average but the reform does not occur due to individual uncertainty.

Suggested Citation

  • Tim Friehe, 2008. "Insurance, Pooling, and Resistance to Reform: The Case of Individual Uncertainty," Economics Bulletin, AccessEcon, vol. 4(18), pages 1-8.
    • Handle: RePEc:ebl:ecbull:eb-08d70013
    as

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    References listed on IDEAS

    as
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    6. Fernandez, Raquel & Rodrik, Dani, 1991. "Resistance to Reform: Status Quo Bias in the Presence of Individual-Specific Uncertainty," American Economic Review, American Economic Association, vol. 81(5), pages 1146-1155, December.
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    More about this item

    Keywords

    individual uncertainty;

    JEL classification:

    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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