Showing 1 - 10 of 13
Traditional insurance theory assumes that the parties involved assign subjective probabilities of losses. Here, we demonstrate that mutually beneficial risk-sharing is possible without the assignment of a probability - it is enough that the sharing parties presume that they are faced with the...
Persistent link: https://www.econbiz.de/10005241772
We present a model of recent institutional developments in litigation funding across several European jurisdictions. They combine contingency fees with third party cover for cost in the event of losing the case: we call these "Third Party Contingency" (TPC) contracts. A TPC contract can make...
Persistent link: https://www.econbiz.de/10005241778
We analyze the role of liability, insurance, and side payments for independent safety controls with unobservable care levels. By independent safety controls we mean that the accident probability depends on the care levels of two parties, and that the effects of the controls on the accident...
Persistent link: https://www.econbiz.de/10005241791
This study deals with a specific implication of adverse selection for annuity pricing. Varying the time path of the payoffs over the retirement periods affects the annuity demand and welfare of individuals with low and with high life expectancy in different ways. Therefore they can be separated...
Persistent link: https://www.econbiz.de/10005823434
We demonstrate that a bank can offer demand deposits and yet avoid bank runs without deposit insurance if it also offers time deposits that have a low liquidation value. Self-fulfilling runs do not occur, as maturity mismatch is eliminated. To do this, we modify Diamond and Dybvig"s [1983] model...
Persistent link: https://www.econbiz.de/10005582103
This paper develops a panic-free bank system in an OLG model. A bank issues both demand deposits and time deposits (or bank stocks) so that the maturity-matching constraint is satisfied. The agents who cannot participate in capital markets put their savings in demand deposits; others favour...
Persistent link: https://www.econbiz.de/10008794555
The paper compares two liability rules, strict liability and the negligence rule, in terms of loss-prevention investment and social welfare when individuals are risk-averse and policymakers do not have lump-sum transfers at their disposal. If the damage payment made by the injurer to the victim...
Persistent link: https://www.econbiz.de/10010828379
It is widely recognized that market failure prevents efficient risk sharing in natural-disaster insurance, leading to several public-private partnership arrangements across the globe. We argue that risk selection by the private partner is potentially an important issue. We illustrate our...
Persistent link: https://www.econbiz.de/10010903180
The economic analysis of tort law is extended to multi-party accidents with unobservable actions. Due to the requirement of no punitive damages, the problem resembles a team production problem. It is shown that asymmetry in the agents' impact on the stochastic damage function can be exploited to...
Persistent link: https://www.econbiz.de/10005764324
We use investment-cash flow regressions to show that both asymmetric-information and agency problems are more severe in Continental Europe than in the Anglo-Saxon countries leading to too little investment by firms with attractive investment opportunities and too much by those with poor...
Persistent link: https://www.econbiz.de/10005823417