This paper analyzes a market in which individuals can purchase guaranteed renewable insurance policies to insure against the risk of loss in the current period and the risk of an increased probability of loss. Individuals who cannot borrow will purchase partially guaranteed renewable insurance at most. Relatively impatient individuals may purchase policies with no guaranteed renewability features. Without borrowing, the results are similar regardless of whether consumers can save.
- Capital market constraints
- Subjective rate of time preference
ASJC Scopus subject areas
- Economics and Econometrics