The Application and Modification of Delegation - Agent Model in Agricultural Insurance

Hai-Lian Xue and Hai-Xia Zhang

Asian Agricultural Research, 2010, vol. 02, issue 08, 3

Abstract: The delegation-agent models in agricultural assurance are established both under the circumstances of information symmetry and information asymmetry. Insurers choose effort level —a* according to the first order optimal condition of at the present stage when the information is symmetric. While the information is asymmetric, the first order optimal condition changed into . In other words, the higher the output, the more and more income of insured. The paper also modifies the models, when the information is symmetric, the insurers determine the effort level of insured—a* based on the first order optimal condition of ; to the contrary, the first order optimal condition would change into . The results show that the insured and the insurers would both benefit from the insurance when the effort cost function related to the expectation of the insured (agricultural producers). If the insured manage the objects of insurance more seriously, the rate of disasters would be lowered. Therefore, the insurance claimed against the insured would be lessened, and the benefits of the insurers would be increased at last.

Keywords: Agribusiness (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:ags:asagre:97627

DOI: 10.22004/ag.econ.97627

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