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Type:	Artigo de Periódico
Title:	Insurance contracts under beliefs contamination
Authors:	Rodrigo Jardim Raad Lucélia Viviane Vaz Raad Gilvan Ramalho Guedes
Abstract:	We propose an insurance model introducing a global contamination on agents' beliefs over exogenous and endogenous variables. We establish conditions for the elasticity of contamination such that insurance demand declines with an increase in the level of such contamination. Our model assumes that agents are risk averse and distort their beliefs about exogenous events. Distortion also influences expectations over insurance transfers by strategic default, and leads to a price markup in relation to its actuarilly fair level as markets select larger insurers, increasing their market power. We impose boundaries on the relation between risk aversion and the elasticity of contamination, which is robust in the sense that insurance demand will decline even when the beliefs contamination leads to an increase in the probability of large loss. We further show that contracts are not efficient, resulting in a long run welfare loss.
Subject:	Elasticidade
language:	por
metadata.dc.publisher.country:	Brasil
Publisher:	Universidade Federal de Minas Gerais
Publisher Initials:	UFMG
metadata.dc.publisher.department:	FCE - DEPARTAMENTO DE CIÊNCIAS ECONÔMICAS FCE - DEPARTAMENTO DE DEMOGRAFIA ICX - DEPARTAMENTO DE MATEMÁTICA
Rights:	Acesso Aberto
URI:	http://hdl.handle.net/1843/54216
Issue Date:	2019
metadata.dc.url.externa:	https://econpapers.repec.org/article/eblecbull/eb-19-00422.htm
metadata.dc.relation.ispartof:	Economics Bulletin
Appears in Collections:	Artigo de Periódico

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