Welfare-improving ambiguity in insurance markets with asymmetric information

• 成果类型: Article
• 署名作者: Koufopoulos, Kostas; Kozhan, Roman
• 署名单位: University of Warwick
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2013.11.003
• 发表日期: 2014
• 页码: 551-560
• 关键词: Ambiguity aversion; asymmetric information; Welfare improvement

摘要

We consider a model of competitive insurance markets involving both asymmetric information and ambiguity about the accident probability. We show that there can exist a full-insurance pooling equilibrium. We also present an example where an increase in ambiguity leads to a strict Pareto improvement. Higher ambiguity relaxes high-risks' incentive compatibility constraint and allows low risks to buy more insurance. Higher ambiguity also deteriorates low risks' expected utility from holding an uncertain prospect. If the former effect dominates, the expected utility of low risks increases and given that high risks' utility remains unaffected, the increase in ambiguity implies a strict Pareto improvement. (C) 2013 Elsevier Inc. All rights reserved.