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Efficient Insurance Contracts under Epsilon-Contaminated Utilities

Shahidi, Niousha; Carlier, Guillaume; Dana, Rose-Anne (2003), Efficient Insurance Contracts under Epsilon-Contaminated Utilities, Geneva Papers on Risk and Insurance. Theory, 28, 1, p. 59-71. http://dx.doi.org/10.1023/A:1022195815221

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Type
Article accepté pour publication ou publié
Date
2003
Journal name
Geneva Papers on Risk and Insurance. Theory
Volume
28
Number
1
Publisher
Springer
Pages
59-71
Publication identifier
Metadata
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Author(s)
Shahidi, Niousha
Carlier, Guillaume
Dana, Rose-Anne
Abstract (EN)
This paper analyses the qualitative properties of optimal contracts when agents have multiple priors and are uncertainty averse in an infinite state space framework. The case of the epsilon-contamination of a given prior, a basic tool in robustness theory is fully developped. It is shown that if both agents have strictly concave utility index, then if the insurer is less uncertainty averse than the insured, he provides a full insurance contract above a deductible for high values of the loss.
Subjects / Keywords
epsilon-contaminated utilities; Choquet integral; uncertainty aversion; capacity
JEL
D81 - Criteria for Decision-Making under Risk and Uncertainty
G22 - Insurance; Insurance Companies; Actuarial Studies
C60 - General