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Self-insurance and market insurance substitutability: An established tenet reconsidered
[Substituabilité entre l'auto-assurance et l'assurance sur le marché : réexamen d'un principe bien établi]

Author

Listed:
  • Jean-Marc Bourgeon

    (X-DEP-ECO - Département d'Économie de l'École Polytechnique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris, UMR PSAE - Paris-Saclay Applied Economics - AgroParisTech - Université Paris-Saclay - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Pierre Picard

    (X - École polytechnique - IP Paris - Institut Polytechnique de Paris)

Abstract

We study the interaction between self-insurance and market insurance when accident losses are multivalued. We show that self-insurance and market insurance may be complementary when self-insurance expenses do not affect much the probability distribution of large losses and the loading factor is high. This contrasts sharply with the conclusion of Ehrlich and Becker (1972) who establish the substitutability between self-insurance and market insurance when the cost of an accident is single-valued.

Suggested Citation

  • Jean-Marc Bourgeon & Pierre Picard, 2026. "Self-insurance and market insurance substitutability: An established tenet reconsidered [Substituabilité entre l'auto-assurance et l'assurance sur le marché : réexamen d'un principe bien établi]," Post-Print hal-05626054, HAL.
    • Handle: RePEc:hal:journl:hal-05626054
    DOI: 10.1016/j.jet.2026.106180
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    Keywords

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    JEL classification:

    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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