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Arbitrage entre assurance et auto-assurance contre les risques naturels

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  • Guibril Zerbo

Abstract

This article studies the effect of preferences on an individual's optimal choice between insurance demand and self-insurance in a risk context and then in an ambiguous context. The innovative idea in this paper is to introduce ambiguity about the effectiveness of self-insurance to understand the nature of the relationship between insurance demand and self-insurance demand. We show that an increase in risk aversion increases the demand for insurance and decreases the demand for self-insurance. However, when risk is introduced on the effectiveness of self-insurance, we show that the individual still prefers self-insurance to market insurance. We also show that when ambiguity is introduced on the efficacy of self-insurance, the individual always prefers market insurance to self-insurance. Finally, we determine the conditions under which the individual's self-insurance effort is higher or lower under ambiguity than risk.

Suggested Citation

  • Guibril Zerbo, 2024. "Arbitrage entre assurance et auto-assurance contre les risques naturels," EconomiX Working Papers 2024-30, University of Paris Nanterre, EconomiX.
    • Handle: RePEc:drm:wpaper:2024-30
    as

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    File URL: https://economix.fr/pdf/dt/2024/WP_EcoX_2024-30.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Natural risks; arbitration; insurance; self-insurance; efficacy; risk; ambiguity;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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