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Handbook of the Economics of Risk and Uncertainty
book

Handbook of the Economics of Risk and Uncertainty

by Mark Machina, W. Kip Viscusi
November 2013
Beginner content levelBeginner
896 pages
35h 10m
English
North Holland
Content preview from Handbook of the Economics of Risk and Uncertainty
Uncertainty and Imperfect Information in Markets
293
But by doing this, the seller could offer the high-risk type a full-insurance contract that
gave him a smaller information rent (e.g., contract
E
). Reducing the information rent
represents a first-order gain for the seller. Because the efficiency loss is second order,
while the rent-reduction benefit is first order, moving away from offering just
F
is in
the seller’s interest. The expected profit-maximizing choices of
D
and
E
depend on
the relative proportions of high and low-risk types in the population. The greater the
proportion of high-risk types, the closer
D
will be to the no-insurance ...
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Publisher Resources

ISBN: 9780444536853