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Insurance contracts with adverse selection when the insurer has ambiguity about the composition of the consumers
Zheng,Mingli1; Wang,Chong1; Li,Chaozheng2
2016-12-08
Source PublicationAnnals of Economics and Finance
ISSN15297373
Volume17Issue:1Pages:179-206
AbstractIn this paper, we consider the optimal contract in a monopolistic insurance market when the insurer has ambiguity about the composition of the consumers. When there are only two types of consumers, we find that high-risk consumers are fully insured, whereas low-risk consumers are only partially insured. For an ambiguity averse insurer, as ambiguity increases, the optimal menu of contracts moves toward the one that equalizes the profits earned by the insurer from the two types of consumers. The insurer may offer the same menu of contracts even if her prior belief changes. For an ambiguity seeking insurer, when the degree of ambiguity increases, the optimal menu moves away from the menu that equalizes the profits earned from the two types of consumers.
KeywordAdverse selection Ambiguity Insurance Monopoly ε-contaminated prior
URLView the original
Language英语
Fulltext Access
Document TypeJournal article
CollectionUniversity of Macau
Corresponding AuthorZheng,Mingli
Affiliation1.Department of EconomicsUniversity of Macau,Macau,China
2.Department of EconomicsUniversity of Kansas,United States
First Author AffilicationUniversity of Macau
Corresponding Author AffilicationUniversity of Macau
Recommended Citation
GB/T 7714
Zheng,Mingli,Wang,Chong,Li,Chaozheng. Insurance contracts with adverse selection when the insurer has ambiguity about the composition of the consumers[J]. Annals of Economics and Finance,2016,17(1):179-206.
APA Zheng,Mingli,Wang,Chong,&Li,Chaozheng.(2016).Insurance contracts with adverse selection when the insurer has ambiguity about the composition of the consumers.Annals of Economics and Finance,17(1),179-206.
MLA Zheng,Mingli,et al."Insurance contracts with adverse selection when the insurer has ambiguity about the composition of the consumers".Annals of Economics and Finance 17.1(2016):179-206.
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