TY  - JOUR
AU  - Muermann,Alexander
AU  - Kunreuther,Howard
TI  - Self-Protection and Insurance with Interdependencies
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12827
PY  - 2007
Y2  - January 2007
UR  - http://www.nber.org/papers/w12827
L1  - http://www.nber.org/papers/w12827.pdf
N1  - Author contact info:
Alexander Muermann
Vienna University of Economics and Business
Department of Finance, Accounting and Statistics
Heiligenstaedter Str. 46 - 48
A - 1190 Wien
AUSTRIA
Tel: +43 1 31336 4948
Fax: +43 1 31336 904948
E-Mail: alexander.muermann@wu.ac.at

Howard Kunreuther
Operations and Information Management
The Wharton School
University of Pennsylvania
3730 Walnut Street, 500 JMHH
Philadelphia, PA 19104-6366
Tel: 215/898-4589
Fax: 215/573-2130
E-Mail: kunreuther@wharton.upenn.edu
AB  - We study optimal investment in self-protection of insured individuals when they face interdependencies in the form of potential contamination from others. If individuals cannot coordinate their actions, then the positive externality of investing in self-protection implies that, in equilibrium, individuals underinvest in self-protection. Limiting insurance coverage through deductibles can partially internalize this externality and thereby improve individual and social welfare.
ER  -