Insurance, Protection from Risk, and Risk-Bearing
State University of New York at Buffalo - Department of Economics; National Bureau of Economic Research (NBER); University of Chicago - University of Chicago Press; Institute for the Study of Labor (IZA)
August 1, 1985
Canadian Journal of Economics Vol. 18, No. 3, August 1985
By extending Ehrlich and Becker's analysis of the demand for insurance we derive several new propositions concerning the demand for self-insurance, self-protection, and market insurance under alternative market conditions. A key behavioural prediction is that if the price of market insurance were responsive to self-protection, then the latter would induce a substitution away from self-insurance and towards market insurance, regardless of the fairness of insurance terms, as long as the utility function exhibits constant or decreasing absolute risk aversion. We compare two of our results to earlier results recently published in this journal by Boyer and Dionne.
Number of Pages in PDF File: 14Accepted Paper Series
Date posted: November 17, 2008 ; Last revised: November 21, 2008
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