IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Second-best insurance contract design in an incomplete market

Listed author(s):
  • GOLLIER, Christian

    (HEC School of Management, Paris)

  • SCHLESINGER, Harris

    (University of Alabama)

This paper considers the optimal form of insurance contracts for multiple risks. A well-known result in the literature is that, under fairly general conditions, an insurance policy with a deductible for aggregate losses is optimal. We provide a new proof of this result based only on stochastic dominance (whereas existing proofs require dynamic optimization techniques). Considering a real-world incompleteness, whereby separate loss exposures are indemnified via separate contracts, we show that separate deductibles are second-best optima in this setting. We compare the indemnity provided in this second-best setting with first-best solutions. The effect of second-best contracts on the individual's total insurance demand is also examined.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://alfresco.uclouvain.be/alfresco/download/attach/workspace/SpacesStore/41ee40ce-1409-4248-aad7-7043945b4cef/coredp_1992_12.pdf
Download Restriction: no

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 1992012.

as
in new window

Length:
Date of creation: 01 Feb 1992
Handle: RePEc:cor:louvco:1992012
Contact details of provider: Postal:
Voie du Roman Pays 34, 1348 Louvain-la-Neuve (Belgium)

Phone: 32(10)474321
Fax: +32 10474304
Web page: http://www.uclouvain.be/core
Email:


More information through EDIRC

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cor:louvco:1992012. 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: (Alain GILLIS)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.