Self-insurance and market insurance substitutability: An established tenet reconsidered

Substituabilité entre l'auto-assurance et l'assurance sur le marché: réexamen d'un principe bien établi

Jean-Marc Bourgeon () and Pierre Picard
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Jean-Marc Bourgeon: X-DEP-ECO - Département d'Économie de l'École Polytechnique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris, UMR PSAE - Paris-Saclay Applied Economics - AgroParisTech - Université Paris-Saclay - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Pierre Picard: X - École polytechnique - IP Paris - Institut Polytechnique de Paris

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Abstract: We study the interaction between self-insurance and market insurance when accident losses are multivalued. We show that self-insurance and market insurance may be complementary when self-insurance expenses do not affect much the probability distribution of large losses and the loading factor is high. This contrasts sharply with the conclusion of Ehrlich and Becker (1972) who establish the substitutability between self-insurance and market insurance when the cost of an accident is single-valued.

Keywords: Self-insurance (search for similar items in EconPapers)
Date: 2026-05
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Published in Journal of Economic Theory, 2026, 234, pp.106180. ⟨10.1016/j.jet.2026.106180⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05626054

DOI: 10.1016/j.jet.2026.106180

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