Disappointment and the Optimal Insurance Contract
This paper studies the optimal insurance contract under disappointment theory. We show that, when the individuals anticipate disappointment, there are two types of optimal insurance contract. The first type contains a deductible and a coinsurance above the deductible. We find that zero marginal cost is just a sufficient but not a necessary condition for a zero deductible. The second type has no deductible and the optimal insurance starts with full coverage for small losses and includes a coinsurance above an upper value of the full coverage.
Volume (Year): 37 (2012)
Issue (Month): 2 (September)
|Contact details of provider:|| Web page: http://www.palgrave-journals.com/|
|Order Information:|| Postal: Palgrave Macmillan Journals, Subscription Department, Houndmills, Basingstoke, Hampshire RG21 6XS, UK|
Web: http://www.palgrave-journals.com/pal/subscribe/index.html Email:
When requesting a correction, please mention this item's handle: RePEc:pal:genrir:v:37:y:2012:i:2:p:258-284. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Iulia Badea)
If references are entirely missing, you can add them using this form.