A MODEL OF AGRICULTURAL INSURANCE IN EVALUATING ASYMMETRIC INFORMATION PROBLEMS

摘要: The main motivation for this paper is the recognition of fact that asymmetric information form moral hazard and adverse selection results in sizeable efficiency losses. These costs are passed back to producers excessively high premium rates also government via crop insurance subsidy program. A secondary stems from a recent debate literature regarding specific effects on agricultural input use. Conventional wisdom suggests will induce reduce usage. competing hypothesis has emerged which may increase their usage or risk increasing inputs. objective was develop model understand why problems might exist compute evaluate relative program can be attributed selection. objectives achieved by developing theoretical insurance, conducting numerical simulations model. Simulation indicated insured farmers use less inputs than uninsured an attempt maximize expected indemnities. Moral fould significant problem only at higher coverage levels. Expected returns (in term indemnities) were found vary substantially between productivity (i.e., risk) types, shown recognize respond these differences. suggest confronted with problem. further myopic insurer could substantial.