When Is a Coinsurance‐Type Insurance Policy Inferior or Even Giffen?

Arthur Hau

Journal of Risk & Insurance, 2008, vol. 75, issue 2, 343-364

Abstract: This article derives the necessary and sufficient conditions for a coinsurance‐type insurance policy covering a particular risk to be inferior and to be Giffen. Mossin's decreasing absolute risk aversion assumption for insurance to be inferior is avoided. The result generalizes Hoy and Robson and Briys, Dionne, and Eeckhoudt's results to the case with a continuum of states and relaxes their assumption of constant relative risk aversion. It is shown that knowledge about the distribution of risk can be used to relax assumptions on an utility function for a coinsurance‐type insurance policy to be inferior and to be Giffen.

Date: 2008
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https://doi.org/10.1111/j.1539-6975.2008.00263.x

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