Self-protection and insurance with interdependencies
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.
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"The limits of competition: Housing insurance in Switzerland,"
European Economic Review,
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- Harry W. Richardson & Peter Gordon & James E. Moore II (ed.), 2005. "The Economic Impacts of Terrorist Attacks," Books, Edward Elgar Publishing, number 3783, July. Full references (including those not matched with items on IDEAS)
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