https://scholars.lib.ntu.edu.tw/handle/123456789/414446
Title: | The design of an optimal insurance contract for irreplaceable commodities | Authors: | Huang R.J. Tzeng L.Y. |
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. |
URI: | https://scholars.lib.ntu.edu.tw/handle/123456789/414446 | ISSN: | 1554964X | DOI: | 10.1007/s10713-006-9464-z https://www.scopus.com/inward/record.uri?eid=2-s2.0-33750194804&doi=10.1007%2fs10713-006-9464-z&partnerID=40&md5=0bc0b75d0ecb9db7b43a86e35363f60f |
Appears in Collections: | 財務金融學系 |
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Huang-Tzeng2006_Article_TheDesignOfAnOptimalInsuranceC.pdf | 109.12 kB | Adobe PDF | View/Open |
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