Optimal Coverage Level Choice with Individual and Area Plans of Insurance

Harun Bulut (), Keith J. Collins and Thomas P. Zacharias

No 103185, 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania from Agricultural and Applied Economics Association

Abstract: We theoretically examine a farmer’s coverage demand with area and individual insurance plans as either separate or integrated options. The individual and area losses are assumed to be imperfectly and positively correlated. With actuarially fair rates, the farmer will fully insure with the individual plan and demand no area insurance regardless of the plans being separate or integrated. Under separate plans, free area insurance and the fair rate for individual insurance, area insurance replaces a portion of individual insurance demand. Under integrated plans, free area insurance, and the fair rate for individual insurance, the farmer will over-insure with individual plan and demand additional area insurance.

Keywords: Agricultural and Food Policy; Agricultural Finance; Crop Production/Industries; Demand and Price Analysis; Farm Management; Financial Economics; Industrial Organization; Marketing; Production Economics; Research Methods/Statistical Methods; Risk and Uncertainty (search for similar items in EconPapers)
Pages: 43
Date: 2011-04-26
New Economics Papers: this item is included in nep-agr and nep-ias
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Working Paper: Optimal Coverage Level Choice with Individual and Area Plans of Insurance (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea11:103185

DOI: 10.22004/ag.econ.103185

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