Internalizing externalities of loss-prevention through insurance monopoly: An analysis of interdependent risks
When risks are interdependent, loss-prevention activities of one agent influence the risks faced by others. The social return to an investment in loss-prevention is greater than the private return. From a perspective of social welfare, the market allocation is not optimal and leads to under-investment in prevention allround. This article considers consumer welfare under conditions of interdependent risks and demonstrates that a monopolistic insurer can internalize the arising externalities by setting appropriate prevention incentives through insurance premiums. A monopoly insurance solution reduces not only costs of risk selection, but can also play an important role in loss-prevention.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
| Length: | |
| Date of creation: | 2005 |
| Date of revision: | |
| Handle: | RePEc:zbw:hzvwps:16 |
| Contact details of provider: | Web page: http://www.hzv-uhh.de/ More information through EDIRC
|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Harris Schlesinger & Emilio Venezian, 1986. "Insurance Markets with Loss-Prevention Activity: Profits, Market Structure, and Consumer Welfare," RAND Journal of Economics, The RAND Corporation, vol. 17(2), pages 227-238, Summer.
- Mario Jametti & Thomas Ungern-Sternberg, 2005.
"Assessing the Efficiency of an Insurance Provider—A Measurement Error Approach,"
The Geneva Papers on Risk and Insurance Theory,
Springer, vol. 30(1), pages 15-34, June.
- Mario Jametti & Thomas von Ungern-Sternberg, 2005. "Assessing the Efficiency of an Insurance Provider—A Measurement Error Approach," The Geneva Risk and Insurance Review, Palgrave Macmillan, vol. 30(1), pages 15-34, June.
- Mario Jametti & Thomas von Ungern-Sternberg, 2003. "Assessing the Efficiency of an Insurance Provider - A Measurement Error Approach," CESifo Working Paper Series 928, CESifo Group Munich.
- Mario JAMETTI & Thomas VON UNGERN-STERNBERG, 2003. "Assessing the Efficiency of an Insurance Provider - A Measurement Error Approach," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 03.05, Université de Lausanne, Faculté des HEC, DEEP.
- Brito, Dagobert L. & Sheshinski, Eytan & Intriligator, Michael D., 1991. "Externalities and compulsary vaccinations," Journal of Public Economics, Elsevier, vol. 45(1), pages 69-90, June.
- Ehrlich, Isaac & Becker, Gary S, 1972. "Market Insurance, Self-Insurance, and Self-Protection," Journal of Political Economy, University of Chicago Press, vol. 80(4), pages 623-48, July-Aug..
This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.
When requesting a correction, please mention this item's handle: RePEc:zbw:hzvwps:16. 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)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 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.