Survey_SoW_2006

Abstract

The model we employ in this chapter consists of a game with 4 stages throughout 2 periods: 1) Insurance companies make irrevocable offers of contracts that specify both premium P and indemnity I. 2) Clients buy at most one contract from one insurance company. When buying insurance, a client has to pay the premium P up-front. 3) The consumer decides which unobservable effort level e to choose in order to avoid the loss. 4) The loss occurs or not and the indemnity is paid out in case of a loss. Stages 1 to 3 take place in period 1, whereas stage 4 takes place in period 2.