Competitive insurance market in the presence of ambiguity

Sajid Anwar and Mingli Zheng ()

Insurance: Mathematics and Economics, 2012, vol. 50, issue 1, 79-84

Abstract: Within the context of a competitive insurance market, this paper examines the impact of ambiguity on the behavior of buyers and sellers. Ambiguity is described through a probability measure on an extended state space that includes extra ambiguous states. It is shown that if insurers face the same or less ambiguity than their customers, a unique equilibrium exists where customers are fully insured. On the other hand, if insurers face more ambiguity than their customers, customers will be under insured and it is even possible that customers may not purchase any insurance.

Keywords: Ambiguity; Competitive equilibrium; Insurance market; Risk (search for similar items in EconPapers)
JEL-codes: D80 D82 G22 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:50:y:2012:i:1:p:79-84

DOI: 10.1016/j.insmatheco.2011.09.001

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