A note on increased probability of loss and the demand for insurance

The Geneva Papers on Risk and Insurance Theory - Tập 20 - Trang 213-216 - 1995
You-Song Jang1, Josef Hadar2
1Korea Institute of Finance, Seoul, Korea
2Department of Economics, Southern Methodist University, Dallas

Tóm tắt

It is shown that the effect of increased probability of loss on the demand for insurance depends on whether both insured and insurer are aware of the change. When both insurer and insured share the same beliefs about the probability of loss (symmetric information), an increase in the loss probability may lead risk-averse agents to demand less insurance.