A note on increased probability of loss and the demand for insurance |
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Authors: | You-Song Jang Josef Hadar |
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Institution: | 1. Korea Institute of Finance, 110-110, Seoul, Korea 2. Department of Economics, Southern Methodist University, 75275, Dallas, TX
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Abstract: | It is shown that the effect of increased probability of loss on the demand for insurance depends on whether both insured and insurer are aware of the change. When both insurer and insured share the same beliefs about the probability of loss (symmetric information), an increase in the loss probability may lead risk-averse agents to demandless insurance. |
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