Fixed-Reimbursement Insurance: Basic Properties and Comparative Statics

Authors

  • Louis Eeckhoudt,

  • Olivier Mahul,

  • John Moran


Louis Eeckhoudt is with the Department of Economics, Catholic Faculties of Mons and Lille. Olivier Mahul is with the Institut National de la Recherche Agronomique, Department of Economics, Rennes. John Moran is with the Department of Economics and Center for Policy Research, Syracuse University. A portion of this research was conducted while Moran was a fellow in the Robert Wood Johnson Foundation's Scholars in Health Policy Research Program. We thank Keith Crocker, Christian Gollier, and Jeff Kubik for helpful conversations. Address all correspondence to John Moran, Center for Policy Research, Syracuse University, e-mail: jmoran@maxwell.syr.edu.

Abstract

In a number of settings, insurance contracts specify a fixed reimbursement in the event of a loss which is not conditioned on the size of the realized loss. In this article, we explore the theoretical properties of this form of insurance and draw comparisons with other types of insurance policies, such as those based on coinsurance and deductibles. We also examine links between our results and those from the literature on precautionary saving.

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