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Reliability of Risk Management: Market Insurance, Self-Insurance and Self-Protection Reconsidered

Listed author(s):
  • Eric Briys

    (Groupe HEC, Jouy-en-Josas, France)

  • Harris Schlesinger

    (University of Alabama, Tuscaloosa, AL, USA, 35487)

  • J.-Matthias Graf v. d. Schulenburg

    (University of Hannover, Hannover, FRG)

This paper examines the three main tools of risk management in a setting where reliability cannot be guaranteed. Thus, for example, insurers might be insolvent, sprinkler systems might be inoperative and alarm systems might be faulty. These types of nonreliability are shown to have significant consequences for risk management. In particular, the relationships between increased risk aversion and the use of the various risk management tools do not carry over from models with full reliability. Moreover, the well-known result of Ehrlich and Becker, that market insurance and self-insurance are substitutes, is shown to fail in the presence of nonreliability risk. The Geneva Papers on Risk and Insurance Theory (1991) 16, 45–58. doi:10.1007/BF00942856

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Article provided by Palgrave Macmillan & International Association for the Study of Insurance Economics (The Geneva Association) in its journal The Geneva Papers on Risk and Insurance Theory.

Volume (Year): 16 (1991)
Issue (Month): 1 (June)
Pages: 45-58

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Handle: RePEc:pal:genrir:v:16:y:1991:i:1:p:45-58
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