EconPapers    
Economics at your fingertips  
 

Research of two‐period insurance contract model with a low compensation period under adverse selection

Ben‐jiang Ma, Jing‐yu Ye, Yuan‐ji Huang and Muhammad Farhan Bashir

Managerial and Decision Economics, 2020, vol. 41, issue 3, 293-307

Abstract: The phenomenon of adverse selection caused by asymmetric information dominates the insurance market. In this paper, based on principal‐agent theory, we establish a two‐period dynamic insurance contract model with a low compensation period. This model introduces the tools of a low compensation period and the increase and decrease in the bonus to identify the risk types of policyholders. We prove that this model can achieve a strict Pareto improvement relative to the two‐period static insurance contract model with a low compensation period. Moreover, we also graphically analyze the conclusion, which can help insurance companies to design more comprehensive insurance contracts.

Date: 2020
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://doi.org/10.1002/mde.3100

Related works:
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:wly:mgtdec:v:41:y:2020:i:3:p:293-307

Access Statistics for this article

Managerial and Decision Economics is currently edited by Antony Dnes

More articles in Managerial and Decision Economics from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().

 
Page updated 2020-03-05
Handle: RePEc:wly:mgtdec:v:41:y:2020:i:3:p:293-307