IDEAS home Printed from
   My bibliography  Save this paper

Self-protection and insurance with interdependencies


  • Kunreuther, Howard
  • Muermann, Alexander


We study optimal investment in self-protection of insured individuals when they face interdependencies in the form of potential contamination from others. If individuals cannot coordinate their actions, then the positive externality of investing in self-protection implies that, in equilibrium, individuals underinvest in self-protection. Limiting insurance coverage through deductibles or selling 'at-fault' insurance can partially internalize this externality and thereby improve individual and social welfare.

Suggested Citation

  • Kunreuther, Howard & Muermann, Alexander, 2007. "Self-protection and insurance with interdependencies," CFS Working Paper Series 2007/22, Center for Financial Studies (CFS).
  • Handle: RePEc:zbw:cfswop:200722

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. von Ungern-Sternberg, Thomas, 1996. "The limits of competition: Housing insurance in Switzerland," European Economic Review, Elsevier, vol. 40(3-5), pages 1111-1121, April.
    2. Ian Ayres & Steven D. Levitt, 1998. "Measuring Positive Externalities from Unobservable Victim Precaution: An Empirical Analysis of Lojack," The Quarterly Journal of Economics, Oxford University Press, vol. 113(1), pages 43-77.
    3. Harry W. Richardson & Peter Gordon & James E. Moore II (ed.), 2005. "The Economic Impacts of Terrorist Attacks," Books, Edward Elgar Publishing, number 3783.
    4. Shavell, Steven, 1991. "Individual precautions to prevent theft: Private versus socially optimal behavior," International Review of Law and Economics, Elsevier, vol. 11(2), pages 123-132, September.
    Full references (including those not matched with items on IDEAS)


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

    Cited by:

    1. Alexander Muermann & Howard Kunreuther, 2008. "Self-protection and insurance with interdependencies," Journal of Risk and Uncertainty, Springer, vol. 36(2), pages 103-123, April.

    More about this item


    Externality; Mitigation; Insurance;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General


    Access and download statistics


    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:zbw:cfswop:200722. 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: (ZBW - German National Library of Economics). General contact details of provider: .

    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 CitEc recognized a reference but did not link an item in RePEc 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 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.