Tools
Tools
Gollier, Christian
(2012)
Optimal insurance design of ambiguous risks.
TSE Working Paper, n. 12-303
Preview |
Text
Download (233kB) | Preview |
Abstract
We examine the characteristics of the optimal insurance contract under linear transaction cost and an ambiguous distribution of losses. Under the standard expected utility model, we know from Arrow (1965) that it contains a straight deductible. In this paper, we assume that the policyholder is ambiguity-averse in the sense of Klibanoff, Marinacci and Mukerji (2005). The optimal contract depends upon the structure of the ambiguity. For example, if the set of
possible priors can be ranked according to the monotone likelihood ratio order, the optimal contract contains a disappearing deductible. We also show that the policyholder’s ambiguity aversion can reduce the optimal insurance coverage.
| Item Type: | Monograph (Working Paper) |
|---|---|
| Language: | English |
| Date: | May 2012 |
| JEL Classification: | D81 - Criteria for Decision-Making under Risk and Uncertainty G22 - Insurance; Insurance Companies |
| Subjects: | B- ECONOMIE ET FINANCE |
| Divisions: | TSE-R (Toulouse) |
| Institution: | Université Toulouse Capitole |
| Site: | UT1 |
| Date Deposited: | 09 Jul 2014 17:25 |
| Last Modified: | 14 Jan 2026 14:24 |
| OAI Identifier: | oai:tse-fr.eu:25815 |
| URI: | https://publications.ut-capitole.fr/id/eprint/15279 |
Available Versions of this Item
- Optimal insurance design of ambiguous risks. (deposited 09 Jul 2014 17:25) [Currently Displayed]
