Optimal risk-sharing under adverse selection and imperfect risk perception
The present paper thoroughly explores second-best efficient allocations in an insurance economy with adverse selection. We start with a natural extension of the classical model, assuming less than perfect risk perception. We characterize the constraints on efficient redistribution, and we summarize the incidence of incentives on the economy with the notions of weak and strong adverse selection. Finally, we show in what sense improving risk perception enhances welfare.
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|Date of creation:||Aug 2005|
|Publication status:||Published in Canadian Journal of Economics, 2005, 38 (3), pp.955-978. <10.1111/j.0008-4085.2005.00311.x>|
|Note:||View the original document on HAL open archive server: https://hal-pjse.archives-ouvertes.fr/halshs-00754069|
|Contact details of provider:|| Web page: https://hal.archives-ouvertes.fr/|