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When Is a Coinsurance‐Type Insurance Policy Inferior or Even Giffen?

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  • Arthur Hau

Abstract

This article derives the necessary and sufficient conditions for a coinsurance‐type insurance policy covering a particular risk to be inferior and to be Giffen. Mossin's decreasing absolute risk aversion assumption for insurance to be inferior is avoided. The result generalizes Hoy and Robson and Briys, Dionne, and Eeckhoudt's results to the case with a continuum of states and relaxes their assumption of constant relative risk aversion. It is shown that knowledge about the distribution of risk can be used to relax assumptions on an utility function for a coinsurance‐type insurance policy to be inferior and to be Giffen.

Suggested Citation

  • Arthur Hau, 2008. "When Is a Coinsurance‐Type Insurance Policy Inferior or Even Giffen?," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 75(2), pages 343-364, June.
    • Handle: RePEc:bla:jrinsu:v:75:y:2008:i:2:p:343-364
    DOI: 10.1111/j.1539-6975.2008.00263.x
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    References listed on IDEAS

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    1. Joseph Eisenhauer & Martin Halek, 1999. "Prudence, risk aversion, and the demand for life insurance," Applied Economics Letters, Taylor & Francis Journals, vol. 6(4), pages 239-242.
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    Cited by:

    1. Giovanni Millo & Gaetano Carmeci, 2011. "Non-life insurance consumption in Italy: a sub-regional panel data analysis," Journal of Geographical Systems, Springer, vol. 13(3), pages 273-298, September.
    2. Felipa De Mello-Sampayo, 2016. "A Spatial Analysis of Mental Healthcare in Texas," Spatial Economic Analysis, Taylor & Francis Journals, vol. 11(2), pages 152-175, June.
    3. Okura Mahito, 2015. "The Impact of Public Insurance on Private Insurance Demand," Asia-Pacific Journal of Risk and Insurance, De Gruyter, vol. 9(1), pages 35-45, January.
    4. de Mello-Sampayo, Felipa, 2014. "Gravity for Health: an Application to State Mental Hospital Admissions in Texas," MPRA Paper 59758, University Library of Munich, Germany.
    5. Christian Gollier & Miles S. Kimball, 2018. "New methods in the classical economics of uncertainty: comparing risks," The Geneva Papers on Risk and Insurance Theory, Springer;International Association for the Study of Insurance Economics (The Geneva Association), vol. 43(1), pages 5-23, May.
    6. Richard Dusansky & Çağatay Koç, 2010. "Implications of the Interaction Between Insurance Choice and Medical Care Demand," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 77(1), pages 129-144, March.
    7. Peter, Richard, 2021. "Prevention as a Giffen good," Economics Letters, Elsevier, vol. 208(C).

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