
Optimal insurance with adverse selection and comonotonic background risk
Alary, David; Bien, Franck (2007), Optimal insurance with adverse selection and comonotonic background risk. https://basepub.dauphine.fr/handle/123456789/20300
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Type
Document de travail / Working paperDate
2007Series title
Document de travail LERNASeries number
8Published in
Toulouse
Pages
7
Metadata
Show full item recordAbstract (EN)
In this note, we consider an adverse selection problem involving an insurance market à la Rothschild-Stiglitz. We assume that part of the loss is uninsurable as in the case with health care or environmental risk. We characterize sufficient conditions such that adverse selection by itself does not distort competitive insurance contracts. A sufficiently large uninsurable loss provides an incentive to high-risk policy holders not to mimic low-risk policy holders without distorting the optimal coverage.Subjects / Keywords
Adverse Selection; Background risk; Optimal ContractRelated items
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