publication . Article . 2006

Prevention in Insurance Markets

Marie-Cécile FAGART; Bidénam KAMBIA-CHOPIN;
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  • Published: 01 Jan 2006 Journal: Annales d'Économie et de Statistique (issn: 0769-489X, Copyright policy)
  • Publisher: JSTOR
Abstract
This paper considers a competitive insurance market under moral hazard and adverse selection, in which preventive efforts and self-protection costs are unobservable by insurance companies. Under reasonable assumptions, the conclusions of Rothschild and Stiglitz (1976) are preserved in our context even if it involves moral hazard. The riskier agents in equilibrium, who would also be the riskier agents under perfect information, receive their moral hazard contract. For other agents, adverse selection reduces coverage, increasing likewise their preventive effort with respect to the hidden-action situation.
Subjects
Medical Subject Headings: health care economics and organizationshumanities
free text keywords: Actuarial science, Adverse selection, Moral hazard, Information asymmetry, Morale hazard, Perfect information, Rothschild, Group insurance, Economics, Unobservable
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publication . Article . 2006

Prevention in Insurance Markets

Marie-Cécile FAGART; Bidénam KAMBIA-CHOPIN;