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Gollier, Christian
(2014)
Optimal insurance design of ambiguous risks.
Economic Theory, vol. 57 (n° 3).
pp. 555-576.
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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: | Article |
|---|---|
| Language: | English |
| Date: | November 2014 |
| Refereed: | Yes |
| JEL Classification: | D81 - Criteria for Decision-Making under Risk and Uncertainty G22 - Insurance; Insurance Companies |
| Subjects: | B- ECONOMIE ET FINANCE |
| Divisions: | TSE-R (Toulouse) |
| Site: | UT1 |
| Date Deposited: | 16 Mar 2015 14:56 |
| Last Modified: | 14 Jan 2026 14:23 |
| OAI Identifier: | oai:tse-fr.eu:29099 |
| URI: | https://publications.ut-capitole.fr/id/eprint/16712 |
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Optimal insurance design of ambiguous risks. (deposited 09 Jul 2014 17:25)
- Optimal insurance design of ambiguous risks. (deposited 16 Mar 2015 14:56) [Currently Displayed]
