Risk aversion influence on insurance market

Daniela Viviana Raduna and Mihai Daniel Roman

MPRA Paper from University Library of Munich, Germany

Abstract: Human behavior, rational or irrational one, influences one of the most complex markets worldwide: the insurance market. In most situations, insurance markets are not competitive and risk neutral insurers negotiate under asymmetric information with actors who exhibit risk aversion. In this paper we develop a game theory model that analyzes the negotiation of an insurance contract under risk aversion conditions (in static and dynamic approach). Risk aversion influence was introduced in the model by intermediary of a discount factor (the in equivalent to players’ patience) instead of using a utility function. The main conclusion is that the customer prefers to agree on a contract of insurance in the first stage of negotiation than having to wait for another round of negotiations, during which they could register various losses.

Keywords: contract negotiations; model; insurance; dynamic game; risk aversion; discount factor (search for similar items in EconPapers)
JEL-codes: C73 C78 D81 G22 (search for similar items in EconPapers)
Date: 2011-11-13, Revised 2012-02-01
New Economics Papers: this item is included in nep-cta, nep-ias and nep-upt
References: Add references at CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/37725/1/MPRA_paper_37725.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:37725

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().