The Production of Goods in Excess of Demand: A Generalization of Self-Protection

Carole Haritchabalet

The Geneva Risk and Insurance Review, 2000, vol. 25, issue 1, 63 pages

Abstract: We consider a risk-averse firm producing a limited number of goods that can be defective. The firm must determine its level of production before knowing which goods will be defective. Such is the case, for example, for a producer of telecommunications satellites. The problem under scrutiny can be interpreted as a generalization of self-protection for more than two states of nature. In our model, the firm determines jointly its level of production and its demand for insurance. It is shown that, under reasonable assumptions, the two strategies are complements. The Geneva Papers on Risk and Insurance Theory (2000) 25, 51–63. doi:10.1023/A:1008797407679

Date: 2000
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