|Title:||The design of an optimal insurance contract for irreplaceable commodities||Authors:||Huang R.J.
|Keywords:||Deductible;Fixed-reimbursement insurance;Irreplaceable commodities;Optimal insurance contract||Issue Date:||2006||Journal Volume:||31||Journal Issue:||1||Start page/Pages:||11-21||Source:||GENEVA Risk and Insurance Review||Abstract:||
This paper discusses optimal insurance contract for irreplaceable commodities. To describe the dual impacts on individuals when a loss occurs to the insured irreplaceable commodities, we use a state-dependent and bivariate utility function, which includes both the monetary wealth and sentimental value as two arguments. We show that over (full, partial) insurance is optimal when a decrease in sentimental value will increase (not change, decrease, respectively) the marginal utility of monetary wealth. Moreover, a non-zero deductible exists even without administration costs. Furthermore, we demonstrate that a positive fixed reimbursement is optimal if (1) the premium is actuarially fair, (2) the monetary loss is a constant, and (3) the utility function is additively separable and the marginal utility of money is higher in the loss state than in the no-loss state. We also characterize comparative statics of fixed-reimbursement insurance under an additively separable preference assumption. ? Springer Science + Business Media, LLC 2006.
|Appears in Collections:||財務金融學系|
|Huang-Tzeng2006_Article_TheDesignOfAnOptimalInsuranceC.pdf||109.12 kB||Adobe PDF||View/Open|
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