The Effect of Ambiguity Aversion on Insurance and Self‐Protection

15 Pages Posted: 15 Dec 2013

See all articles by David Alary

David Alary

University of Toulouse 1 - Toulouse School of Economics (TSE)

Christian Gollier

University of Toulouse 1 - Industrial Economic Institute (IDEI); CESifo (Center for Economic Studies and Ifo Institute)

Nicolas Treich

French National Institute for Agricultural Research (INRA); CESifo (Center for Economic Studies and Ifo Institute)

Date Written: December 2013

Abstract

In this article, we derive a set of simple conditions such that ambiguity aversion always raises the demand for self‐insurance and the insurance coverage, but decreases the demand for self‐protection. We also characterise the optimal insurance design under ambiguity aversion and exhibit a case in which the straight deductible contract is optimal as in the expected utility model.

Suggested Citation

Alary, David and Gollier, Christian and Treich, Nicolas, The Effect of Ambiguity Aversion on Insurance and Self‐Protection (December 2013). The Economic Journal, Vol. 123, Issue 573, pp. 1188-1202, 2013. Available at SSRN: https://ssrn.com/abstract=2367571 or http://dx.doi.org/10.1111/ecoj.12035

David Alary (Contact Author)

University of Toulouse 1 - Toulouse School of Economics (TSE) ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France

Christian Gollier

University of Toulouse 1 - Industrial Economic Institute (IDEI) ( email )

Manufacture des Tabacs
21 Allee de Brienne bat. F
Toulouse Cedex, F-31000
France
+33 61 12 86 30 (Phone)
+33 61 12 86 37 (Fax)

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Nicolas Treich

French National Institute for Agricultural Research (INRA) ( email )

147, rue de l'Universite
Paris Cedex 07, 78-Yvelines 75338
France
+33 0 1 42 75 90 00 (Phone)
+33 0 1 47 05 99 66 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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