Machnes, Yaffa; Wong, Kit Pong - In: The Geneva Risk and Insurance Review 28 (2003) 1, pp. 73-80
This paper examines the optimal production decision of a firm facing revenue risk. We show that the purchase of actuarially fair deductible insurance unambiguously induces the firm to produce more if the firm is not only risk averse but also prudent. If the firm's perferences satisfy constant...