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Self-Insurance and Self-Protection as Public Goods

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  • Lohse, Tim
  • Robledo, Julio
  • Schmidt, Ulrich

Abstract

Most pure public goods like lighthouses, dams, or national defense provide utility mainly by insuring against hazardous events. Our paper focuses on this insurance character of public goods. As for private actions against hazardous events, one can distinguish between self-insurance (SI) and self-protection (SP) also in the context of public goods. For both cases of SI and SP we analyze efficient public provision levels as well as provision levels resulting from Nash behavior in a private provision game. An interesting aspect of considering public goods as insurance devices is the interaction with market insurance. It turns out that the availability of market insurance reduces the provision level of the public good for both, the public and the private provision, regardless of whether we consider SI or SP. Moreover, we show that Nash behavior has always a larger impact than the availability of market insurance.

Suggested Citation

  • Lohse, Tim & Robledo, Julio & Schmidt, Ulrich, 2010. "Self-Insurance and Self-Protection as Public Goods," Kiel Working Papers 1613, Kiel Institute for the World Economy.
    • Handle: RePEc:zbw:ifwkwp:1613
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    7. Wing Yan Lee & Derrick W. H. Fung, 2021. "Optimal Effort on Self-Insurance-Cum-Protection: A New Analysis Using Yaari’s Dual Theory," Mathematics, MDPI, vol. 9(22), pages 1-12, November.
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    12. Vesa Kanniainen & Staffan Ringbom, 2015. "The Value of NATO Option for a New Member," CESifo Working Paper Series 5399, CESifo.
    13. Grislain-Letrémy, Céline, 2012. "Assurance et prévention des catastrophes naturelles et technologiques," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/9073 edited by Villeneuve, Bertrand.
    14. Heike Auerswald & Kai A. Konrad & Marcel Thum, 2018. "Adaptation, mitigation and risk-taking in climate policy," Journal of Economics, Springer, vol. 124(3), pages 269-287, July.
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    16. Toshihiro Ihori & Martin McGuire, 2006. "Patterns of Non-exponential Growth of Macroeconomic Models: Two-parameter Poisson-Dirichlet Models," CIRJE F-Series CIRJE-F-450, CIRJE, Faculty of Economics, University of Tokyo.
    17. Biener, Christian & Eling, Martin & Landmann, Andreas & Pradhan, Shailee, 2018. "Can group incentives alleviate moral hazard? The role of pro-social preferences," European Economic Review, Elsevier, vol. 101(C), pages 230-249.
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    19. Shuichi Tsugawa, 2024. "Optimal redistributive policy under disaster risk: self-protection, social mitigation and social adaptation," Working Papers e203, Tokyo Center for Economic Research.
    20. Fraser, Clive D., 2021. "Protection in numbers? Self-protection as a local public good," Journal of Mathematical Economics, Elsevier, vol. 96(C).
    21. Doncaster, C. Patrick & Tavoni, Alessandro & Dyke, James G., 2017. "Using Adaptation Insurance to Incentivize Climate-change Mitigation," Ecological Economics, Elsevier, vol. 135(C), pages 246-258.
    22. Konrad, Kai A. & Thum, Marcel, 2012. "The role of economic policy in climate change adaptation," EIB Working Papers 2012/02, European Investment Bank (EIB).
    23. Toshihiro Ihori & Martin McGuire, 2006. "Group Provision Against Adversity: Security By Insurance vs. Protection," CARF F-Series CARF-F-086, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    24. Pan, Chen-Yu, 2020. "Protections from natural disasters as local public goods: Migration and local adaptations," Regional Science and Urban Economics, Elsevier, vol. 85(C).
    25. Abrahamsen, Eirik Bjorheim & Asche, Frank, 2011. "On how access to an insurance market affects investments in safety measures, based on the expected utility theory," Reliability Engineering and System Safety, Elsevier, vol. 96(3), pages 361-364.

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    Keywords

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    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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