TY  - JOUR
AU  - Kaplow,Louis
TI  - Optimal Insurance Contracts When Establishing The Amount of Losses is Costly
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4290
PY  - 1996
Y2  - February 1996
UR  - http://www.nber.org/papers/w4290
L1  - http://www.nber.org/papers/w4290.pdf
N1  - Author contact info:
Louis Kaplow
Harvard University
Hauser 322
Cambridge, MA  02138
Tel: 617/495-4101
Fax: 617/496-4880
E-Mail: meskridge@law.harvard.edu
AB  - 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.
ER  -