Contracting with Present-Biased Consumers in Insurance Markets

doi:10.1057/s10713-016-0011-2

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	Contracting with Present-Biased Consumers in Insurance Markets
	Ai, Jing 1; Zhao, Lin2 ; Zhu, Wei 3
	2016-09-01
发表期刊	Geneva Risk and Insurance Review
ISSN	1554-964X
卷号	41 期号:2 页码:107-148
摘要	Present bias challenges consumers with self-control problems when they implement precautionary efforts in insurance markets. To explore how rational insurance companies respond to this bias, this paper analyzes a contract design problem in a monopolistic insurance market with ex ante moral hazard. Weconsider two types of consumers with this bias: the "naifs", who do not foresee the present bias and make decisions in a myopic way, and the "sophisticates", who foresee the bias and incorporate it in the decision process. Relative to the benchmark case where consumers are time-consistent, we show that (i) present bias reduces the monopoly profit, regardless of the consumer type; (ii) present bias can either reduce or increase the coverage of the profit-maximizing insurance contract depending on the extent of the bias; and (iii) when present bias is severe, the insurance company can profitably exploit naifs but not sophisticates. These results still hold when consumers are heterogeneous and their types are unknown to the insurance company.
关键词	present bias time-inconsistent preference self-control consumer naivete moral hazard insurance market
DOI	10.1057/s10713-016-0011-2
语种	英语
资助项目	National Science Foundation of China (NSFC)[71301161] ; National Science Foundation of China (NSFC)[71532013] ; National Science Foundation of China (NSFC)[71201029] ; National Science Foundation of China (NSFC)[71373044] ; Fundamental Research Funds for the Central Universities in UIBE[CXTD5-04]
WOS研究方向	Business & Economics
WOS类目	Business, Finance ; Economics
WOS记录号	WOS:000392921300001
出版者	PALGRAVE MACMILLAN LTD
引用统计
文献类型	期刊论文
条目标识符	http://ir.amss.ac.cn/handle/2S8OKBNM/24627
专题	系统科学研究所
通讯作者	Ai, Jing
作者单位	1.Univ Hawaii Manoa, Shidler Coll Business, 2404 Maile Way, Honolulu, HI 96822 USA 2.Chinese Acad Sci, Acad Math & Syst Sci, Beijing 100190, Peoples R China 3.Univ Int Business & Econ, Sch Insurance & Econ, Beijing 100029, Peoples R China
推荐引用方式 GB/T 7714	Ai, Jing,Zhao, Lin,Zhu, Wei. Contracting with Present-Biased Consumers in Insurance Markets[J]. Geneva Risk and Insurance Review,2016,41(2):107-148.
APA	Ai, Jing,Zhao, Lin,&Zhu, Wei.(2016).Contracting with Present-Biased Consumers in Insurance Markets.Geneva Risk and Insurance Review,41(2),107-148.
MLA	Ai, Jing,et al."Contracting with Present-Biased Consumers in Insurance Markets".Geneva Risk and Insurance Review 41.2(2016):107-148.