Risk management activities of a non-industrial privateforest owner with a bivariate utility function

Marielle Brunette () and Stéphane Couture

Review of Agricultural, Food and Environmental Studies, 2018, vol. 99, issue 3-4, 281–302

Abstract: We analyze the insurance and self-insurance choices of a private forest owner whoseutility is bivariate (consumption and forest amenity value). We show that under fairpremium, full insurance is optimal only if the cross derivative of the utility func-tion is equal to zero, whereas under unfair premium, optimal partial insurance isvalidated only if the cross derivative is positive. We also show that insurance andself-insurance may be substitutes, and if preferences are separable and the cost ofinsurance is not so high, then insurance and self-insurance are always considered assubstitutes. However, we find in an illustration with a non-separable bivariate utilityfunction, characterized by weights given to consumption and amenities, that insur-ance and self-insurance are complement. We obtain that the weight given to amenitiessubstantially affects optimal risk management activities for unfair insurance. Theseresults highlight the importance to represent the forest owner’s behavior through abivariate utility function.

Keywords: Bivariate; utility·Cross; derivative·Forest; management·Insurance·Risk·Self-insurance (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations:

Downloads: (external link)
https://link.springer.com/content/pdf/10.1007%2Fs41130-018-0081-x.pdf (application/pdf)

Related works:
Journal Article: Risk management activities of a non-industrial privateforest owner with a bivariate utility function (2018)
Journal Article: Risk management activities of a non-industrial private forest owner with a bivariate utility function (2018)
Working Paper: Risk management activities of a non-industrial private forest owner with a bivariate utility function (2018)
Working Paper: Risk management activities of a non-industrial private forest owner with a bivariate utility function (2014)
Working Paper: Risk management activities of a non-industrial private forest owner with a bivariate utility function (2014)
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:rae:jouraf:v:99:y:2018:i:3-4:p:281-302

Access Statistics for this article

Review of Agricultural, Food and Environmental Studies is currently edited by Stephan Marette and Ronan Le Velly

More articles in Review of Agricultural, Food and Environmental Studies from INRA Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Nathalie Saux-Nogues ().