SHORTER ARTICLES The Design of Optimal Insurance Contracts Without the Nonnegativity Constraint on Claims 1. Introduction

The purpose of this paper is to generalize previous results on optimal insurance. The most famous theorem on this topic is due to Arrow (1971), 1974). He examines the optimal choice of insurance coverage subject to two constraints. First, he assumes that the insured is confronted with a premium whic...

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Bibliographic Details
Published inThe Journal of risk and insurance Vol. 54; no. 2; p. 314
Main Author Gollier, Christian
Format Journal Article
LanguageEnglish
Published Malvern Blackwell Publishing Ltd 01.06.1987
Subjects
Control theory
Costs
Expected utility
Expected values
Insurance coverage
Insurance policies
Moral hazard
Net losses
Random variables
Reimbursement
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ISSN0022-4367
1539-6975

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Summary:The purpose of this paper is to generalize previous results on optimal insurance. The most famous theorem on this topic is due to Arrow (1971), 1974). He examines the optimal choice of insurance coverage subject to two constraints. First, he assumes that the insured is confronted with a premium which depends only upon the actuarial value of the policy. A particular case of this pricing constraint is given by a premium containing the expected value of claims plus a loading proportional to it. Second, insurance payments are constrained to be always nonnegative.
Bibliography:SourceType-Scholarly Journals-1
ObjectType-Statistics/Data Report-1
content type line 14
ISSN:0022-4367
1539-6975