NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Optimal Insurance Contracts When Establishing The Amount of Losses is Costly

Louis Kaplow

NBER Working Paper No. 4290 (Also Reprint No. r2030)
Issued in March 1993
NBER Program(s):   LE

The problem of establishing the amount of losses covered by public and private insurance is often characterized by asymmetric information, in which the claimant already knows the extent of a loss but this can be demonstrated to the insurer only at a cost. It is shown that a simple arrangement, which provides greater coverage whenever individuals demonstrate unusually high losses, gives claimants an excessive incentive to establish the amount of their losses. This paper determines what insurance claims process, consistent with the form typically employed in existing insurance arrangements, is optimal.

download in pdf format
   (167 K)

download in djvu format
   (116 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w4290

Published:

Users who downloaded this paper also downloaded these:
Eaton w2172 Public Debt Guarantees and Private Capital Flight
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us