Self-protection and insurance with interdependencies

We study optimal investment in self-protection of insured individuals when they face interdependencies in the form of potential contamination from others. If individuals cannot coordinate their actions, then the positive externality of investing in self-protection implies that, in equilibrium, individuals underinvest in self-protection. Limiting insurance coverage through deductibles or selling 'at-fault' insurance can partially internalize this externality and thereby improve individual and social welfare.

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Year of publication:	2007
Authors:	Kunreuther, Howard ; Muermann, Alexander
Publisher:	Frankfurt a. M. : Goethe University Frankfurt, Center for Financial Studies (CFS)
Subject:	Versicherungsökonomik \| Versicherungsschaden \| Haftung \| Entscheidung bei Risiko \| Konsuminterdependenz \| Spieltheorie \| Externality \| Mitigation \| Insurance

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Series:	CFS Working Paper ; 2007/22
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	538467959 [GVK] hdl:10419/25523 [Handle] RePEc:zbw:cfswop:200722 [RePEc]
Classification:	C72 - Noncooperative Games ; D62 - Externalities ; D80 - Information and Uncertainty. General
Source:	EconStor

Persistent link: https://www.econbiz.de/10010298371