Insurance bargaining under ambiguity

Rachel Huang, Yi-Chieh Huang and Larry Y. Tzeng

Insurance: Mathematics and Economics, 2013, vol. 53, issue 3, 812-820

Abstract: This paper investigates the effects of an increase in ambiguity aversion and an increase in ambiguity in an insurance bargaining game with a risk-and-ambiguity-neutral insurer and a risk-and-ambiguity-averse client. Both a cooperative and a non-cooperative bargaining game are examined. We show that, in both games, full coverage is optimal in the presence of ambiguity, and that the optimal premium is higher in the presence of ambiguity than in the absence of it. Furthermore, the optimal premium will increase with both the degree of ambiguity aversion and an increase in ambiguity.

Keywords: Insurance bargaining; Cooperative bargaining; Non-cooperative bargaining; Ambiguity; Ambiguity aversion (search for similar items in EconPapers)
JEL-codes: D81 G22 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:53:y:2013:i:3:p:812-820

DOI: 10.1016/j.insmatheco.2013.10.001

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