INSURANCE ECONOMICS

Catalog description

This course examines the principles of economic risk, its effect on distribution of resources and how public policy should be conducted in markets for risk. Preferences among risky scenarios: expected utility theory and the theory of risk aversion. Allocation of risk using markets for contingent claims vs. insurance pools in economies with complete information. The functioning of insurance markets when information is asymmetric, under moral hazard and adverse selection. The insurance markets function in a competitive equilibrium and what should be public policy. Role of asset markets in allocating risk.