Private-Information Insurance Contracts in Continuous Time
by
Bart
Taub
University of Illinois at Urbana-Champaign
Abstract
A
continuous-time private-information insurance contract is analyzed.
The special case analyzed is equivalent to a credit equilibrium. Defection from the contract and its equivalent credit
equilibrium using smooth-pasting methods is analyzed.
The contract and its equivalent standard credit equilibrium cannot be
made immune to defection. Immunity
from defection can be reinstated by constructing
a constrained insurance contract as described in [3], but the insurance
value provided is reduced below that of the full-information case.
Last
updated March 27, 2002 by Linda Huff
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