INCOME‐CONSTRAINED PURCHASES OF INSURANCE AND ASSETS
Joseph G. Eisenhauer
(Associate Professor, Department of Economics and Finance, Richard J. Wehle School of Business, Canisius College, Buffalo, NY 14208. This paper was completed during a sabbatical at the University of Pennsylvania's Wharton School of Business; the S. S. Huebner Foundation for Insurance Education provided partial funding. Doris Geide‐Stevenson, Harris Schlesinger, and an anonymous referee provided helpful comments on earlier drafts. Any errors are my own.)
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Abstract
Insurance and asset holdings are modeled as the jointly determined outcomes of a constrained optimization problem. Consequently, (1) full coverage may be optimal despite limited premium loading, (2) insurance is normal if insurable assets are normal, (3) insurance cannot be a Giffen good, and (4) insurance is a complement to price‐elastic assets.
Citation
Eisenhauer, J.G. (1997), "INCOME‐CONSTRAINED PURCHASES OF INSURANCE AND ASSETS", Studies in Economics and Finance, Vol. 17 No. 2, pp. 50-62. https://doi.org/10.1108/eb028731
Publisher
:MCB UP Ltd
Copyright © 1997, MCB UP Limited