|Title:||Hidden regret in insurance markets||Authors:||Huang R.J.
|Issue Date:||2016||Journal Volume:||83||Journal Issue:||1||Start page/Pages:||181-216||Source:||Journal of Risk and Insurance||Abstract:||
We examine insurance markets with two-dimensional asymmetric information on risk type and on preferences related to regret. In contrast to Rothschild and Stiglitz (), the equilibrium can be efficient; that is, it can coincide with the equilibrium under full information. Furthermore, we show that pooling, semipooling, and separating equilibria can exist. Specifically, there exist separating equilibria that predict a positive correlation between the level of insurance coverage and risk type, as in the standard economic models of adverse selection, but there also exist separating equilibria that predict a negative correlation between the level of insurance coverage and risk type. Since optimal choice of regretful customers depends on foregone alternatives, the equilibrium includes a contract that is offered but not purchased. ? American Risk and Insurance Association.
|Appears in Collections:||財務金融學系|
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