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Self-Insurance, Self-Protection and Market Insurance within the Dual Theory of Choice

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  • Christophe Courbage

    (Lombard Odier & Cie, Geneva, Switzerland)

Abstract

As demonstrated by Ehrlich and Becker [1972], Expected Utility Theory predicts that market insurance and self-insurance are substitutes, whilst surprisingly, market insurance and self-protection could be complements. This article examines the robustness of this conclusion, as well as its extensions under the Dual Theory of Choice [Yaari, 1987]. In particular, the non-reliability of self-insurance activities, background risk and asymmetric information are considered. The Geneva Papers on Risk and Insurance Theory (2001) 26, 43–56. doi:10.1023/A:1011212324117

Suggested Citation

  • Christophe Courbage, 2001. "Self-Insurance, Self-Protection and Market Insurance within the Dual Theory of Choice," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 26(1), pages 43-56, June.
    • Handle: RePEc:pal:genrir:v:26:y:2001:i:1:p:43-56
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    Cited by:

    1. Gauchon, Romain & Loisel, Stéphane & Rullière, Jean-Louis & Trufin, Julien, 2020. "Optimal prevention strategies in the classical risk model," Insurance: Mathematics and Economics, Elsevier, vol. 91(C), pages 202-208.
    2. Sarah Bensalem & Nicolás Hernández Santibáñez & Nabil Kazi-Tani, 2019. "Prevention efforts, insurance demand and price incentives under coherent risk measures," Working Papers hal-01983433, HAL.
    3. Marielle Brunette & Stéphane Couture, 2008. "Assurances et activités de réduction des risques en foresterie : une approche théorique," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement, INRA Department of Economics, vol. 86(1), pages 55-78.
    4. Brunette Marielle & Corcos Anne & Couture Stéphane & Pannequin François, 2019. "On the uselessness of self-insurance clauses?," Economics Bulletin, AccessEcon, vol. 39(2), pages 830-837.
    5. Romain Gauchon & Stéphane Loisel & Jean-Louis Rullière & Julien Trufin, 2020. "Optimal prevention of large risks with two types of claims," Post-Print hal-02314914, HAL.
    6. Romain Gauchon & Stéphane Loisel & Jean-Louis Rullière & Julien Trufin, 2019. "Optimal prevention of large risks with two types of claims," Working Papers hal-02314914, HAL.
    7. Stéphane Couture & Marielle Brunette & François Pannequin & Anne Corcos, 2016. "The self-insurance clauses puzzle : risk versus ambiguity," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-02801783, HAL.
    8. Ozlem Ozdemir, 2007. "Valuation of Self-Insurance and Self-Protection under Ambiguity: Experimental Evidence," Jena Economics Research Papers 2007-034, Friedrich-Schiller-University Jena.
    9. Biener, Christian & Eling, Martin & Landmann, Andreas & Pradhan, Shailee, 2018. "Can group incentives alleviate moral hazard? The role of pro-social preferences," European Economic Review, Elsevier, vol. 101(C), pages 230-249.
    10. Neji Saidi, 2022. "Willingness to pay, surplus and Insurance policy under dual theory," Papers 2204.04794, arXiv.org.
    11. Bensalem, Sarah & Santibáñez, Nicolás Hernández & Kazi-Tani, Nabil, 2020. "Prevention efforts, insurance demand and price incentives under coherent risk measures," Insurance: Mathematics and Economics, Elsevier, vol. 93(C), pages 369-386.
    12. Courbage, Christophe & Rey, Béatrice & Treich, Nicolas, 2013. "Prevention and precaution," TSE Working Papers 13-445, Toulouse School of Economics (TSE).
    13. Romain Gauchon & Stéphane Loisel & Jean-Louis Rullière & Julien Trufin, 2019. "Optimal prevention strategies in the classical risk model," Working Papers hal-02314899, HAL.
    14. Han Bleichrodt, 2022. "The prevention puzzle," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 47(2), pages 277-297, September.
    15. Christophe Courbage, 2006. "Smoking Behavior and Rank-Dependent Expected-Uitility," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 142(II), pages 223-230, June.
    16. Stefanos Nastis & Thomas Crocker, 2007. "A note on parental and child risk valuation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 38(1), pages 119-134, September.
    17. Wing Yan Lee & Derrick W. H. Fung, 2021. "Optimal Effort on Self-Insurance-Cum-Protection: A New Analysis Using Yaari’s Dual Theory," Mathematics, MDPI, vol. 9(22), pages 1-12, November.
    18. Romain Gauchon & Karim Barigou, 2021. "Expected utility maximization with stochastically ordered returns," Working Papers hal-03295594, HAL.
    19. Sarah Bensalem, 2020. "Self-insurance and Non-concave Distortion Risk Measures," Working Papers hal-02936349, HAL.
    20. Pannequin, François & Corcos, Anne & Montmarquette, Claude, 2020. "Are insurance and self-insurance substitutes? An experimental approach," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 797-811.
    21. François Pannequin & Anne Corcos & Claude Montmarquette, 2016. "Behavioral foundations of the substitutability between insurance and self-insurance: An experimental study," CIRANO Working Papers 2016s-12, CIRANO.

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