Foundations of Insurance Economics: Readings in Economics and Finance (Huebner International Series on Risk, Insurance and Economic Security (14))

Economic and financial research on insurance markets has undergone dramatic growth since its infancy in the early 1960s. Our main objective in compiling this volume was to achieve a wider dissemination of key papers in this literature. Their significance is highlighted in the introduction, which surveys major areas in insurance economics. While it was not possible to provide comprehensive coverage of insurance economics in this book, these readings provide an essential foundation to those who desire to conduct research and teach in the field. In particular, we hope that this compilation and our introduction will be useful to graduate students and to researchers in economics, finance, and insurance. Our criteria for selecting articles included significance, representativeness, pedagogical value, and our desire to include theoretical and empirical work. While the focus of the applied papers is on property-liability insurance, they illustrate issues, concepts, and methods that are applicable in many areas of insurance. The S. S. Huebner Foundation for Insurance Education at the University of Pennsylvania's Wharton School made this book possible by financing publication costs. We are grateful for this assistance and to J. David Cummins, Executive Director of the Foundation, for his efforts and helpful advice on the contents. We also wish to thank all of the authors and editors who provided permission to reprint articles and our respective institutions for technical and financial support. Front Matter....Pages i-xv An Introduction to Insurance Economics....Pages 1-48 Choice Under Uncertainty: Problems Solved and Unsolved....Pages 49-82 Risk Aversion in the Small and in the Large....Pages 83-98 Increasing Risk: I. A Definition....Pages 99-117 Aspects of Rational Insurance Purchasing....Pages 118-133 Incomplete Markets for Insurance: An Overview....Pages 134-155 The Interdependence of Individual Portfolio Decisions and the Demand for Insurance....Pages 156-163 Market Insurance, Self-Insurance, and Self-Protection....Pages 164-189 On the Corporate Demand for Insurance....Pages 190-205 The Demand for Insurance and Protection: The Case of Irreplaceable Commodities....Pages 206-219 Insurance, Risk and Resource Allocation....Pages 220-229 Equilibrium in a Reinsurance Market....Pages 230-250 The Design of an Optimal Insurance Policy....Pages 251-263 Risk Aversion and the Negotiation of Insurance Contracts....Pages 264-279 On Moral Hazard and Insurance....Pages 280-301 An Analysis of the Principal-Agent Problem....Pages 302-340 The Judgment Proof Problem....Pages 341-354 Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information....Pages 355-375 Adverse Selection and Statistical Discrimination....Pages 376-385 Multi-Period Insurance Contracts....Pages 386-406 Adverse Selection and Repeated Insurance Contracts....Pages 407-423 Market Equilibrium with Private Knowledge....Pages 424-443 The Efficiency Effects of Categorical Discrimination in the Insurance Industry....Pages 444-467 Cartels, competition and regulation in the property-liability insurance industry....Pages 468-520 A note on the relative efficiency of property-liability insurance distribution systems....Pages 521-531 Ownership Structure Across Lines of Property-Casualty Insurance....Pages 532-559 Risk Considerations in Insurance Ratemaking....Pages 560-571 Price Regulation in Property-Liability Insurance: A Contingent-Claims Approach....Pages 572-591 Risk-Based Premiums for Insurance Guaranty Funds....Pages 592-608 An International Analysis of Underwriting Cycles in Property-Liability Insurance....Pages 609-625 Prices and Profits in the Liability Insurance Market....Pages 626-684 Reserve Levels and Reserve Requirements for Profit-maximizing Insurance Firms....Pages 685-704 Solvency regulation in the property-liability insurance industry: empirical evidence....Pages 705-723 A Note on the Impact of Auto Insurance Rate Regulation....Pages 724-728