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Insurability and Moral Hazard in Agricultural Insurance Markets

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  • Robert G. Chambers

Abstract

Pareto-optimal and constrained Pareto-optimal all-risk insurance contracts are studied. Conditions required for emergence of competitive insurance markets are isolated and discussed. Full insurance contracts are shown to be dominated by contracts involving coinsurance and deductibles if insurers are pseudo-risk averse. The effect of moral hazard on all-risk agricultural insurance indemnity schedules is examined. Results for indemnity schedules under moral hazard and constant absolute risk aversion show that providing farmers with the incentives to take appropriate actions may imply lower deductibles in the presence of moral hazard than in the absence of moral hazard.

Suggested Citation

  • Robert G. Chambers, 1989. "Insurability and Moral Hazard in Agricultural Insurance Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 71(3), pages 604-616.
    • Handle: RePEc:oup:ajagec:v:71:y:1989:i:3:p:604-616.
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    File URL: http://hdl.handle.net/10.2307/1242016
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