Insurance contracts under beliefs contamination

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dc.creatorRodrigo Jardim Raad
dc.creatorLucélia Viviane Vaz Raad
dc.creatorGilvan Ramalho Guedes
dc.date.accessioned2023-05-30T20:38:53Z
dc.date.accessioned2025-09-08T23:08:19Z
dc.date.available2023-05-30T20:38:53Z
dc.date.issued2019
dc.identifier.issn1545-2921
dc.identifier.urihttps://hdl.handle.net/1843/54216
dc.languagepor
dc.publisherUniversidade Federal de Minas Gerais
dc.relation.ispartofEconomics Bulletin
dc.rightsAcesso Aberto
dc.subjectElasticidade
dc.subject.otherRisk aversion
dc.subject.otherInsurance
dc.subject.otherSubjective probability
dc.subject.otherElasticity
dc.subject.otherBeliefs Contamination
dc.titleInsurance contracts under beliefs contamination
dc.typeArtigo de periódico
local.citation.epage2903
local.citation.issue4
local.citation.spage2890
local.citation.volume39
local.description.resumoWe 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.
local.identifier.orcidhttps://orcid.org/0000-0003-3974-3517
local.identifier.orcidhttps://orcid.org/0000-0003-2888-0823
local.identifier.orcidhttps://orcid.org/0000-0001-8231-238X
local.publisher.countryBrasil
local.publisher.departmentFCE - DEPARTAMENTO DE CIÊNCIAS ECONÔMICAS
local.publisher.departmentFCE - DEPARTAMENTO DE DEMOGRAFIA
local.publisher.departmentICX - DEPARTAMENTO DE MATEMÁTICA
local.publisher.initialsUFMG
local.url.externahttps://econpapers.repec.org/article/eblecbull/eb-19-00422.htm

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