Is Risk Taking or Moral Hazard Beneficial to the Insured and the Society?

25 Pages Posted: 1 Sep 2013 Last revised: 12 Jan 2017

See all articles by Hong Mao

Hong Mao

Shanghai Second Polytechnic University

James M. Carson

University of Georgia

Krzysztof Ostaszewski

Illinois State University

Date Written: November 6, 2016

Abstract

In this article, we discuss whether and when the risk taking and moral hazard is beneficial to the insured and to the society as well. We establish model by stochastic optimal control theory. We obtain the optimal levels of risk taking and moral hazard from perspectives of the insured and the society. Finally we make some discussions on insurance and moral hazard.

Keywords: Moral hazard, Stochastic optimal control, Social Welfare

JEL Classification: I20

Suggested Citation

Mao, Hong and Carson, James M. and Ostaszewski, Krzysztof, Is Risk Taking or Moral Hazard Beneficial to the Insured and the Society? (November 6, 2016). Available at SSRN: https://ssrn.com/abstract=1887425

Hong Mao

Shanghai Second Polytechnic University ( email )

No.2360, Jinhai Road
Shanghai, 201209
China

James M. Carson

University of Georgia ( email )

Athens, GA 30602-6254
United States

Krzysztof Ostaszewski (Contact Author)

Illinois State University ( email )

Department of Mathematics
Normal, IL 61790-4520
United States
+1-309-438-7226 (Phone)
+1-309-438-5866 (Fax)

HOME PAGE: http://math.illinoisstate.edu/krzysio

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