ISSN:
1554-9658
Keywords:
Default Risk
;
Reliability
;
Risk Aversion
;
Risk Management
Source:
Springer Online Journal Archives 1860-2000
Topics:
Economics
Notes:
Abstract This paper examines the three main tools of risk management in a setting where reliability cannot be guaranteed. Thus, for example, insurers might be insolvent, sprinkler systems might be inoperative and alarm systems might be faulty. These types of nonreliability are shown to have significant consequences for risk management. In particular, the relationships between increased risk aversion and the use of the various risk management tools do not carry over from models with full reliability. Moreover, the well-known result of Ehrlich and Becker, that market insurance and selfinsurance are substitutes, is shown to fail in the presence of nonreliability risk.
Type of Medium:
Electronic Resource
URL:
http://dx.doi.org/10.1007/BF00942856
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