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Threshold control of mutual insurance with limited commitment

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  • Yan, Jia
  • Liu, John J.
  • Li, Kevin X.

Abstract

We study the optimal premium policy of mutual insurance when the charged premium cannot be higher than a preset rate. We provide a complete solution to the problem and use numerical simulations to illustrate how the optimal premium policy responds to changes of outside factors. The results are useful for mutual insurance firms to design premium policies and can be used to test the behavior of these firms in empirical studies.

Suggested Citation

  • Yan, Jia & Liu, John J. & Li, Kevin X., 2008. "Threshold control of mutual insurance with limited commitment," Insurance: Mathematics and Economics, Elsevier, vol. 43(1), pages 108-115, August.
    • Handle: RePEc:eee:insuma:v:43:y:2008:i:1:p:108-115
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    References listed on IDEAS

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