EconPapers    
Economics at your fingertips  
 

On the Design of Optimal Insurance Policies under Manipulation of Audit Cost

Pierre Picard

International Economic Review, 2000, vol. 41, issue 4, 1049-71

Abstract: This article characterizes optimal insurance policies under deterministic auditing in a situation where the policyholders can misrepresent their losses. Under exogenous audit cost, a straight deductible is optimal when the policyholders can inflate their claims by intentionally increasing the damages. If policyholders can manipulate the audit cost and the insurer is unable to observe the cost incurred by his or her auditor, then the auditor should receive contingent fees. When the auditor is risk-averse, the optimal insurance policy involves some degree of coinsurance. An upper limit on coverage is optimal when the auditor is infinitely risk-averse. Copyright 2000 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Date: 2000
References: Add references at CitEc
Citations: View citations in EconPapers (29) Track citations by RSS feed

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Working Paper: On the design of optimal insurance policies under manipulation of audit cost (1996) Downloads
Working Paper: On the Design of Optimal Insurance Policies under Manipulation of Audit Cost (1996)
Working Paper: On the design of Optimal Insurance Policies Under Manipulation of Audit Cost (1996)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ier:iecrev:v:41:y:2000:i:4:p:1049-71

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0020-6598

Access Statistics for this article

International Economic Review is currently edited by Harold L. Cole

More articles in International Economic Review from Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association 160 McNeil Building, 3718 Locust Walk, Philadelphia, PA 19104-6297. Contact information at EDIRC.
Bibliographic data for series maintained by Wiley-Blackwell Digital Licensing ().

 
Page updated 2019-03-31
Handle: RePEc:ier:iecrev:v:41:y:2000:i:4:p:1049-71