The Birth of Insurance Contracts - The Ataturk Institute for Modern ...
The Birth of Insurance Contracts - The Ataturk Institute for Modern ...
The Birth of Insurance Contracts - The Ataturk Institute for Modern ...
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c1(y) ✛<br />
FIGURE 5<br />
(k1 > k, Two-side Risk Aversion, Higly Costly and Risky Venture)<br />
k2 − k + x<br />
c2(x)<br />
Agent 2 (0,0)<br />
(the financier)<br />
✻<br />
k1<br />
k1 − k + y<br />
<br />
.<br />
.<br />
.<br />
.<br />
.<br />
.<br />
.<br />
.<br />
.<br />
.<br />
.<br />
.<br />
.<br />
.<br />
.<br />
.<br />
.<br />
.<br />
.<br />
BP2<br />
.<br />
✓ ✓✓<br />
✓ ✓✓<br />
✓ ✓✓<br />
✓ ✓✓<br />
✓ ✓✓✓✓<br />
CCλk1 >k<br />
✓ ✓<br />
✓ ✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓ ✓✓<br />
✓ ✓<br />
✓ ✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓ ✓✓<br />
✓ ✓<br />
✓ ✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓ ✓✓<br />
✓ ✓<br />
✓ ✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓ ✓✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
❝❝<br />
❧<br />
❧<br />
❅<br />
❅<br />
❅<br />
❙<br />
❙<br />
❙❙<br />
❙<br />
❚<br />
❙<br />
Ex-ante P C1<br />
❚<br />
❙<br />
❏<br />
❧ ❏<br />
❧ ❏<br />
❧<br />
❝ ❏<br />
❝ ❆<br />
❝<br />
. . . . . . . . . . . . k1<br />
.<br />
BP1<br />
.<br />
.<br />
k2<br />
. . . . . . . . . . . . A.<br />
. . . . . . k1 − k + x<br />
.<br />
✡<br />
.<br />
✡✡<br />
✡ ✡✡<br />
CCλk1 =0<br />
✡ ✡<br />
✡<br />
✡<br />
✡✡<br />
✡ ✡✡<br />
✡ ✡✡<br />
✓ ✓✓<br />
✓ ✓✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
❩ ❆<br />
❩❩◗◗◗❍❍Ex-ante<br />
✓ ❆ Individual Rationality<br />
❆ (k1 > k)<br />
❆<br />
❇ P C2 ≡<br />
❇❇ Individual Rationality<br />
✡ ✡✡<br />
✡ ✡✡✡<br />
✡ ✡✡<br />
✓ ✓✓✓<br />
✓ ✓✓✓<br />
✓ ✓✓✓<br />
✓ ✓✓✓<br />
✓ ✓✓✓<br />
✡ ✡✡ ✡ ✡<br />
✡ ✡✡<br />
✓ ✓✓ ✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
✓<br />
.<br />
.<br />
.<br />
.<br />
.<br />
.<br />
.<br />
.<br />
.<br />
.<br />
.<br />
.<br />
.<br />
.<br />
.<br />
(0,0)<br />
. ✲<br />
❄<br />
❄<br />
k2 − k + y k2 k1 + k2 − k + y<br />
k2 − k + y < c ∗ 2(y) = k2 − k + y + ɛ < k2<br />
37<br />
Agent 1<br />
(the merchant)<br />
c2(y)