Nber Working Paper Series Self-protection and Insurance with Interdependencies
نویسندگان
چکیده
The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research. ' 2007 by Alexander Muermann and Howard Kunreuther. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including ' notice, is given to the source. ABSTRACT We study optimal investment in self-protection of insured individuals when they face interdependencies in the form of potential contamination from others. If individuals cannot coordinate their actions, then the positive externality of investing in self-protection implies that, in equilibrium, individuals underinvest in self-protection. Limiting insurance coverage through deductibles can partially internalize this externality and thereby improve individual and social welfare.
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