Costs of self-protection and balance of a competitive insurance market
Disciplines
Text
French
ID: <
10.7202/009903ar>
·
DOI: <
10.7202/009903ar>
This paper considers a competitive insurance market under moral hazard and adverse selection, in which both the agent’s preventive effort and self protection costs are unobservable by the insurance companies. We show that the agent provides the same level of self-protection than without adverse selection. The agent who has a higher marginal cost is proposed his moral hazard contract whereas adverse selection may make the lower marginal cost agent’s coverage to decrease. Finally, equilibrium may not exist.