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Evaluating the effects of asymmetric information in a model of crop insurance

  • Adeyemi Esuola
  • Michael Hoy
  • Zahirul Islam
  • Calum G. Turvey

Asymmetric information in the form of moral hazard and adverse selection can result in sizable program costs for government-provided crop insurance plans. We present a methodology and illustrative simulations to show how these two types of information problems interact in a way to create program costs for the providers of crop insurance. Our methodology allows us to ascertain the relative contributions to program costs of these two sources of asymmetric information. The exercise is useful in pointing out directions for future study seeking ways to improve the design of crop insurance plans.

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Article provided by Emerald Group Publishing in its journal Agricultural Finance Review.

Volume (Year): 67 (2007)
Issue (Month): 2 (September)
Pages: 341-356

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Handle: RePEc:eme:afrpps:v:67:y:2007:i:2:p:341-356
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  2. Babcock, Bruce A. & Hennessy, David A., 1996. "Input Demand Under Yield and Revenue Insurance," Staff General Research Papers 794, Iowa State University, Department of Economics.
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  12. Picard Pierre, 1986. "On the design of incentive schemes under moral hazard and adverse selection," CEPREMAP Working Papers (Couverture Orange) 8602, CEPREMAP.
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