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File name: SSRN-id961496. ; Size: 1844K
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Market Insurance, Self-Insurance, and Self-Protection
Isaac Ehrlich
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)
Gary S. Becker
University of Chicago - Department of Economics; University of Chicago - Booth School of Business
Journal of Political Economy, Vol. 80, No. 4, pp. 623-648, July-August 1972
Abstract:
The article develops a theory of demand for insurance that emphasizes the interaction between market insurance, self-insurance, and self- rotection. The effects of changes in prices, income, and other variables on the demand for these alternative forms of insurance are analyzed using the state preference approach to behavior under uncertainty. Market insurance and self-insurance are shown to be substitutes, but market insurance and self-protection can be complements. The analysis challenges the notion that moral hazard is an inevitable consequence of market insurance, by showing that under certain conditions the latter may lead to a reduction in the probabilities of hazardous events.
Number of Pages in PDF File: 27
Accepted Paper Series
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Date posted: February 7, 2007
Suggested CitationEhrlich, Isaac and Becker, Gary S., Market Insurance, Self-Insurance, and Self-Protection. Journal of Political Economy, Vol. 80, No. 4, pp. 623-648, July-August 1972. Available at SSRN: http://ssrn.com/abstract=961496
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