Article in a working paper series:

David Alary, Christian Gollier and Nicolas Treich, The Effect of Ambiguity Aversion on Insurance and Self-protection, 2011, revised July 9, 2012.

Abstract

In this paper, we show that ambiguity aversion always raises the demand for self-insurance and the insurance coverage, but may de- crease the demand for self-protection. We also characterize the opti- mal insurance design under ambiguity aversion, and exhibit a case in which the straight deductible contract is optimal as in the expected utility model.

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