IDEAS home Printed from https://ideas.repec.org/p/hal/journl/halshs-00754069.html
   My bibliography  Save this paper

Optimal risk-sharing under adverse selection and imperfect risk perception

Author

Listed:
  • Arnold Chassagnon

    (GREMAQ - Groupe de recherche en économie mathématique et quantitative - UT1 - Université Toulouse 1 Capitole - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique)

  • Bertrand Villeneuve

    (LERNA - Economie des Ressources Naturelles - UT1 - Université Toulouse 1 Capitole - INRA - Institut National de la Recherche Agronomique - CEA - Commissariat à l'énergie atomique et aux énergies alternatives)

Abstract

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.

Suggested Citation

  • Arnold Chassagnon & Bertrand Villeneuve, 2005. "Optimal risk-sharing under adverse selection and imperfect risk perception," Post-Print halshs-00754069, HAL.
  • Handle: RePEc:hal:journl:halshs-00754069 DOI: 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
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Fender, John, 1999. "A general equilibrium model of crime and punishment," Journal of Economic Behavior & Organization, Elsevier, vol. 39(4), pages 437-453, July.
    2. Gary S. Becker, 1974. "Crime and Punishment: An Economic Approach," NBER Chapters,in: Essays in the Economics of Crime and Punishment, pages 1-54 National Bureau of Economic Research, Inc.
    3. Shavell, Steven, 1987. "The Optimal Use of Nonmonetary Sanctions as a Deterrent," American Economic Review, American Economic Association, vol. 77(4), pages 584-592, September.
    4. Abdala Mansour & Nicolas Marceau & Steeve Mongrain, 2006. "Gangs and Crime Deterrence," Journal of Law, Economics, and Organization, Oxford University Press, vol. 22(2), pages 315-339, October.
    5. Steven D. Levitt, 1998. "Juvenile Crime and Punishment," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1156-1185, December.
    6. Polinsky, A. Mitchell & Shavell, Steven, 2001. "Corruption and optimal law enforcement," Journal of Public Economics, Elsevier, vol. 81(1), pages 1-24, July.
    7. Arun S. Malik, 1990. "Avoidance, Screening and Optimum Enforcement," RAND Journal of Economics, The RAND Corporation, vol. 21(3), pages 341-353, Autumn.
    8. Sah, Raaj K, 1991. "Social Osmosis and Patterns of Crime," Journal of Political Economy, University of Chicago Press, vol. 99(6), pages 1272-1295, December.
    9. Basu, Kaushik & Bhattacharya, Sudipto & Mishra, Ajit, 1992. "Notes on bribery and the control of corruption," Journal of Public Economics, Elsevier, vol. 48(3), pages 349-359, August.
    10. Mookherjee, Dilip & Png, I P L, 1992. "Monitoring vis-a-vis Investigation in Enforcement of Law," American Economic Review, American Economic Association, vol. 82(3), pages 556-565, June.
    11. Gary S. Becker & George J. Stigler, 1974. "Law Enforcement, Malfeasance, and Compensation of Enforcers," The Journal of Legal Studies, University of Chicago Press, vol. 3(1), pages 1-18, January.
    12. Garoupa, Nuno & Jellal, Mohamed, 2002. "Information, Corruption and Optimal Law Enforcement," CEPR Discussion Papers 3560, C.E.P.R. Discussion Papers.
    13. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
    14. Marjit, Sugata & Shi, Heling, 1998. "On controlling crime with corrupt officials," Journal of Economic Behavior & Organization, Elsevier, vol. 34(1), pages 163-172, January.
    15. Chang, Juin-jen & Lai, Ching-chong & Yang, C. C., 2000. "Casual police corruption and the economics of crime:: Further results," International Review of Law and Economics, Elsevier, vol. 20(1), pages 35-51, March.
    16. Steven Shavell & A. Mitchell Polinsky, 2000. "The Economic Theory of Public Enforcement of Law," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 45-76, March.
    17. Kugler, Maurice & Verdier, Thierry & Zenou, Yves, 2005. "Organized crime, corruption and punishment," Journal of Public Economics, Elsevier, vol. 89(9-10), pages 1639-1663, September.
    18. Bowles, Roger & Garoupa, Nuno, 1997. "Casual police corruption and the economics of crime," International Review of Law and Economics, Elsevier, vol. 17(1), pages 75-87, March.
    19. Garoupa, Nuno, 2000. "The Economics of Organized Crime and Optimal Law Enforcement," Economic Inquiry, Western Economic Association International, vol. 38(2), pages 278-288, April.
    20. Yves Zenou & Sebastien Steinmetz, 2001. "On the Existence of Spatial Monopolies Under Free Entry," Economics Bulletin, AccessEcon, vol. 4(8), pages 1-10.
    21. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
    22. Isaac Ehrlich, 1974. "Participation in Illegitimate Activities: An Economic Analysis," NBER Chapters,in: Essays in the Economics of Crime and Punishment, pages 68-134 National Bureau of Economic Research, Inc.
    23. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
    24. Besley, Timothy & McLaren, John, 1993. "Taxes and Bribery: The Role of Wage Incentives," Economic Journal, Royal Economic Society, vol. 103(416), pages 119-141, January.
    25. Polinsky, Mitchell & Shavell, Steven, 1979. "The Optimal Tradeoff between the Probability and Magnitude of Fines," American Economic Review, American Economic Association, vol. 69(5), pages 880-891, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Plisson, Manuel, 2009. "Assurabilité et développement de l'assurance dépendance," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/5064 edited by Lorenzi, Jean-Hervé.
    2. Amy Finkelstein & Kathleen McGarry, 2006. "Multiple Dimensions of Private Information: Evidence from the Long-Term Care Insurance Market," American Economic Review, American Economic Association, vol. 96(4), pages 938-958, September.
    3. Giuseppe, DE FEO & Jean, HINDRIKS, 2005. "Efficiency of Competition in Insurance Markets with Adverse Selection," Discussion Papers (ECON - Département des Sciences Economiques) 2005042, Université catholique de Louvain, Département des Sciences Economiques.
    4. S. Hun Seog, 2009. "Insurance Markets With Differential Information," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 76(2), pages 279-294.

    More about this item

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:halshs-00754069. 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: (CCSD). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.