Home     Giacomo Bonanno
Department of Economics,  University of California, Davis, CA 95616-8578
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Table of contents:
The Economics of Uncertainty and Insurance
Giacomo Bonanno

Preface.................................................................................................................. 3

Contents ................................................................................................................5  

1. Introduction....................................................................................................... 9

2. Insurance: basic notions ....................................................................................11

2.1 Uncertainty and lotteries 

2.2 Money lotteries and attitudes to risk 

2.3 Certainty equivalent and the risk premium 

2.4 Insurance: basic concepts 

2.5 Isoprofit lines 

2.6 Profitable insurance requires risk aversion

2.7 Exercises [24 exercises]

2.8 Solutions to exercises

3. Expected Utility.......................................................................................... 49

            3.1 Expected utility: theorems

            3.2 Expected utility: the axioms

            3.3 Exercises [10 exercises]

            3.4 Solutions to exercises

4. Money lotteries revisited .................................................................................73

4.1 von Neumann Morgenstern preferences over money lotteries

4.2 Measures of risk aversion

4.3 Some noteworthy utility functions

4.4 Higher risk

4.5 Exercises [20 exercises]

4.6 Solutions to exercises

 

5. Insurance: Part 2 ................................................................................. 107

5.1 Binary lotteries and indifference curves

5.2 Back to insurance

5.3 Choosing from a menu of contracts

5.4 Mutual insurance

5.5 Exercises [19 exercises]

5.6 Solutions to exercises

6. Insurance and moral hazard .................................................................................. 157

6.1 Moral hazard or hidden action

6.2 Two levels of unobserved effort

6.3 The reservation utility locus 

6.4 The profit-maximizing contract for a monopolist

6.5 Exercises [7 exercises]

6.6 Solutions to exercises

 

7. Insurance and adverse selection .................................................................................... 183

            7.1 Adverse selection or hidden type

            7.2 Two types of customers

            7.3 The monopolist under asymmetric information 

            7.4 A perfectly competitive insurance industry  

            7.5 Exercises [9 exercises]

            7.6 Solutions to exercises

 


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