Should loss of earnings be compensated? The established law and economics wisdom considers pure economic loss as a transfer of wealth from the victim to a third party, whose earnings increase as a consequence of the accident. Such transfers do not amount to a social loss and, hence, should not...

Limited liability may result in inefficient accident prevention, because a relevant portion of the expected harm is externalized on victims. This paper shows that under some restrictive conditions further limiting liability by means of a liability cap can improve caretaking.

The collection of information necessary for decision-making is often delegated to agents (e.g. bureaucrats, advisors, lawyers). If both the pros and cons of a decision have to be examined, it is better to use competing agents instead of a single agent. The reason is that two conflicting pieces...

There is extensive literature on whether courts or legislators produce efficient rules, but which of them produces rules efficiently? The law is subject to uncertainty ex ante; uncertainty makes the outcomes of trials difficult to predict and deters parties from settling disputes out of court. In...

This paper focuses on the relation between worker's productivity and retirement decision. Assuming that productivity follows geometric Brownian motion with drift, there exists such a level of productivity for which it is optimal to retire. The worker buys an insurance, which gives a constant...

In this paper we derive a market value for Guaranteed Annuity Option using martingale modeling techniques. Furthermore, we show how to construct a static replicating portfolio of vanilla interest rate swaptions that replicates the Guaranteed Annuity Option. Finally, we illustrate with historical...

This paper examines the impact of coinsurance exemption for prescription medicines applied to elderly individuals in Spain after retirement. To evaluate this coinsurance change we use a rich administrative dataset that links pharmaceutical consumption and hospital discharge records for the full...

This paper empirically analyzes moral hazard in car insurance using a dynamic theory of an insuree's dynamic risk (ex ante moral hazard) and claim (ex post moral hazard) choices and Dutch longitudinal micro data. We use the theory to characterize the heterogeneous dynamic changes in incentives...

We study the dependence between the downside risk of European banks and insurers. Since the downside risk of banks and insurers differs, an interesting question from a supervisory point of view is the risk reduction that derives from diversification within large banks and financial...

We model and measure simultaneous large losses of the market value of insurers to understand the impact of shocks on the insurance sector. The downside risk of insurers is explicitly modelled by common and idiosyncratic risk factors. Since reinsurance is important for the capacity of insurers,...